JSW Energy's Q4FY19 results (Upgrade to Neutral) - Shelves unrelated diversification
Q4FY19 results
- Standalone company (operating Vijayanagar and Ratnagiri) reported a PAT of Rs476m/Rs2.5bn inn Q4FY19/FY19. Baspa and Karcham reported a EBITDA of Rs1bn/11bn while Barmer TPS, reported a EBITDA of Rs2.3bn/Rs19bn in Q4FY19/FY19. As a result, consolidated EBITDA is Rs4.8bn (Vs estimate of Rs9.8bn) and JSW reported profit of Rs39m(est of Rs1bn). FY19 PAT was Rs7bn. Low utilisation of merchant capacity is reason for miss in estimates.
- PLF for Vijayanagar TPS for Q4FY19/FY19 was 37%/50%, -1178/226bps yoy while Ratnagiri TPS PLF was 73%/64%, -1453/-114 bps yoy. At present, Vijayanagar TPS sells 515MW and Ratnagiri TPS sells 330MW power on merchant basis. Baspa and Karcham hydro power plant’s (operating under a subsidiary), generated 0.4BU/5.1BU, flat/(11%) yoy
- JSW Energy has tied up for power with Telangana for 300MW at a rate of Rs5.48/unit from July 2019 to March 2020. Besides, it has also won a contract to supply power of 300MW at a rate of Rs4.41/unit. Note that this is yet to be converted into power purchase agreements.
- Besides, long term portfolio has increased from 65% in FY17 to 80.4% at end of FY19. Conversion of medium term PPA will further secure earnings. JSW has tied up 316MW from Vijayanagar under long term. Karcham is now fully tied up under long term PPA and Ratnagiri is expected to tie up capacity on long term to its group companies.
- JSW Energy has also shelved the plan to enter into electric vehicle business. Earlier, it had also shelved plans to enter into solar module business. Note that the capital outlay for this business was Rs65bn
Key positives: Shelved the plans to pursue Electric Vehicle business
Key negatives: Low PLF of Vijayanagar power plant
Impact on financials: Minor changes in earnings estimates; introduce FY21 earnings at Rs12bn
Valuation and View
JSW has increased proportion of long term and medium term power purchase portfolio in last 24 months. We expect utilization of merchant capacity to improve in FY20 and FY21E based on improving demand supply situations. Moreover, shelving of electric vehicle alleviates concern regarding capital allocation. In addition, low leverage will help JSW in acquiring stressed assets at attractive valuations. In view of improved earning profile and uncertainty, we upgrade the stock to Neutral with a target price of Rs69/share (stock is trading at 10xFY20)
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.