JSW Energy Ltd. share price target

JSWELs 3QFY17 continues to highlight the tough times faced by it led by increasing coal prices and falling power demand and merchant prices. JSWEL reported PAT of Rs 214mn (-93% YoY) in line with our estimates. Vijaynagar plant PLF continues to be subdued (53% in 3QFY17 vs. 96% in 3QFY16). JSWEL has started supplying power under new short term PPA (650MW with Karnataka), however increase in imported coal prices continues to exacerbate the problem for JSWEL.

Lower Generation & Weak Merchant Realisation Dent Profits Net sales of JSW Energy (JSWEL) was impacted by lower generation, lower realisation which declined by 26.5% in line with our estimates. Revenue, EBITDA and reported PAT of JSWEL declined 26.7% yoy, 42.6% yoy & 90% yoy in 3QFY17, respectively. Net generation dipped by 23% yoy to 4,644mn units, primarily due to lower system demand and shutdown of Unit-I of 300MW at Ratnagiri plant due to turbine variations. JSWEL has lost 40% due to weak operational performance. Considering recent correction in stock price, we believe that the negatives relating to weak merchant...

JSWELs 1QFY17 net profit at Rs 3.7bn was largely in line with our estimate of Rs 3.5bn. The cut in guidance of merchant realisation for FY17 to Rs 4/kwh from Rs 4.3-4.35/kwh was a setback.

Revenue, Operating Profit Improve on Higher Generation Revenue, EBITDA and reported PAT of JSW Energy (JSWEL) grew 16.9% yoy, 37.0% yoy & 18.7% yoy in 1QFY17. Though net generation increased by 43% yoy during the quarter primarily due to generation from hydro power plants acquired in FY16 and improved performance of Ratnagiri plant it was partly offset by...

JSW Energy's (JSWE) 1QFY17 EBITDA rose 37% YoY to INR11.2b, led by contribution from the acquisition of hydro assets (+INR3.9b). Reported PAT increased 32% YoY to INR3.7b. Reported net debt to equity stood at 1.35x as of June 2016, down from the revised 1.5x as of March 2016 (1.77x under earlier GAAP). Other key changes on account of the adoption of Ind-AS are highlighted later. Realization down 9.4% QoQ: Power generation rose 43% YoY to 6.4bu. Long-term sales formed 62% of total sales (+~700bp YoY). Reported realization fell 8.1% YoY/9.4% QoQ to INR3.84/kWh due to a higher share of hydro volumes (which...

JSW Energy announced the acquisition of a 500MW power plant at Bina (MP) from Jaiprakash Power Ventures. Bina is a low-risk acquisition as the plant has (1) Regulated PPA with MP DISCOMs for 70% capacity (65% on regulated RoE and 5% on variable cost) and (2) An FSA with Coal India.

JSW Energy announced the acquisition of a 1,000MW power plant at Tamnar (Chhattisgarh) from Jindal Steel and Power. The plant does not have any PPA in place and there is uncertainty about fuel supply. JSPL is currently procuring coal from e-auctions. Proximity to a number of coal mines will keep landed cost of coal low.

We reinstate coverage on JSW Energy with a BUY. The stock has corrected ~40% in the trailing year owing to (1) A bearish outlook for merchant prices and (2) Probable acquisition of a 1,050MW under-construction power plant from Monnet Power, which may pose a medium-term risk to profitability and leverage of the company.

JSW Energy (JSWEL) has reported Rs26.8bn revenue in 4QFY16 registering 22.6% yoy growth, in line with our estimate backed by increased generation capacity. Recent acquisition of 1,391MW hydel capacity aided led to total 4,531MW generation capacity from 3,140MW that aided good revenue performance. Its EBITDA grew 27.7% yoy to Rs11.3bn but reported PAT declined 6.1% yoy in line with our estimates due to higher interest cost (up 61.7% yoy), depreciation costs (up 33.9% yoy) and loss in hydro assets (Rs730mn). At current valuation of 1.0x P/B its FY18E, provides margin of safety. Thus, we reiterate our BUY recommendation...

JSW Energy (JSWEL) reported revenue of Rs26.4bn in 3QFY16; a growth of 11.3% yoy in line with our estimate. Recent acquisition of Hydro capacity of 1,391MW aided in increased generation capacity from 3,140MW to 4,531MW which led to a good revenue performance. EBITDA, too grew by 22.3% yoy to Rs11.9bn but reported PAT disappointed us as it was down by 15.6% yoy below our expectation due to higher interest cost (up 58% yoy). With sustainable core RoEs of 15-17%, we believe current valuation at 1.2x P/B its FY17E, provides margin of safety. Hence, we upgrade our recommendation from SELL to BUY with a Target Price of Rs89....