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MOSL: JSW ENERGY (Sell)-Miss on account of higher operating and finance costs

JSW ENERGY: Miss on account of higher operating and finance costs

(JSW IN, Mkt Cap USD5.5b, CMP INR251, TP INR180, 28% Downside, Sell)

 

• JSW Energy (JSWE)’s results reflect the impact of higher operating and finance costs, leading to lower profitability. At the consolidated level, EBITDA was down 6% YoY to INR7.0b, 7% below our estimate of INR7.5b.
• The co. has set its sights on improving its Renewables footprint, with plans to reach a total of 10GW of installed capacity by FY25 (v/s 4.5GW currently). PPAs have been signed for SECI IX (810MW) and captive projects (958MW). However, even as we build in the successful commissioning of 2.2GW of RE projects over the next 2–3 years, the current price rightly factors this in. We roll forward our valuation to FY24, with revised Target Price of INR180/sh (earlier: INR130/sh). We maintain our Sell rating on the stock.

 

Profit miss on higher-than-expected O&M expenses and interest costs

• JSWE's 1QFY21 EBITDA was down 6% YoY to INR7.0b (v/s our estimate of INR7.5b). The miss on our no. was on account of higher-than-expected other expenses. Other expenses were up 55% YoY to INR1.3b, weighed by higher repair and O&M costs.
• Interest costs increased 13% QoQ / 21% YoY to INR2.9b (est. INR1.9b) on account of an INR0.9b prepayment and certain write-offs on INR-denominated loans related to JSW Hydro. Other income was up 62% YoY to INR1.3b on higher late payment surcharge (LPS) income. PAT was down 6% YoY to INR2.0b (our est: INR2.6b).