JSW Energy's Q4FY18 results (Underperformer) - Dark spread falls further
Q4FY18 results
- Net generation for Vijayanagar TPS for Q4FY18 was 857MU (49% PLF), a decline of 34% yoy while Ratnagiri TPS net generation was 1.4BU (58% PLF), an increase of 48% yoy. Vijayanagar TPS (860MW) entire capacity and 425MW of Ratnagiri TPS sells power on merchant basis. FY18 PLF of Vijayanagar was 52%, the lowest in its history.
- Dark spread (standalone power realisation minus fuel cost) has declined to Rs0.63/unit (decline of Rs0.30/unit qoq; declind of Rs0.43/yoy in Q4FY17) due to lower merchant realisations (200MW in bilateral at Rs4.1/unit and balance in merchant) and elevated international coal prices. As a result, standalone EBITDA was Rs1.4bn (vs Rs1.8bn in Q3FY18 and Rs1.5bn in Q4FY17) and adj. loss came in at mere Rs400m in Q4FY18. Reported losses were at Rs6.6bn mdue to provision of Rs4.7bn related to acquisition related advances to JPVL. FY18 standalone reported loss was Rs2.5bn.
- Baspa and Karcham hydro power plant’s (operating under a subsidiary), generated 1.3BU (vs design energy of 1.2BU) and 4.6BU (vs design energy of 4.2BU) in FY18. Baspa and Karcham reported a EBITDA of Rs1.1bn/Rs13bn in Q4FY18/FY18. Barmer TPS, (operating in another SPV) has deemed PLF of 85%/83% in Q4FY18/FY18; norm. PLF of 80%). It reported a EBITDA of Rs5.7bn/22bn/ in Q4FY18/FY18
- As a result, consolidated EBITDA is Rs4.2bn (Vs estimate of Rs6.2bn) and JSW reported adjusted loss of Rs650m, the first quarterly loss.
Key negatives: Enhanced capital expenditure planned in Electric Vehicles to Rs65bn (from Rs35-40bn earlier); Provision of Rs4.2bn against JPVL acquisition loan, Investment in solar module manufacturing of 1000MW
Impact on financials: Maintain our earnings estimates
Valuation and View
We believe JSW energy merchant capacity will find it challenging to tie up power at remunerative prices on account of surplus untied capacities in the country and slow pickup in demand (as evident in low PLF of Vijaynagar of 52%; deficit of 0%). As a result, we expect JSW earnings in FY19 and FY20 to remain under pressure. Given the challenges in tying up power for untied capacity, we believe there is high level of uncertainty in FY19 and FY20 earnings. In view of sharp decline in earnings and increased uncertainty, we reiterate our Underperformer rating with a target price of Rs63/share.
JSW Energy is primarily engaged in the business of generation of power, operation and maintenance of power plants, trading in power and mining related activities.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.