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MOSL: JSW ENERGY (Neutral)-Benefit of lower fuel cost diluted by new CERC norms

JSW ENERGY: Benefit of lower fuel cost diluted by new CERC norms

(JSW IN, Mkt Cap USD1.6b, CMP INR68, TP INR75, 11% Upside, Neutral)

 

Revenue grew 2% YoY to INR24.1b in 1QFY20. Generation was down 4% YoY to 5.9BU, while realization increased 6% YoY to INR4.11/kWh led by certain one-offs. EBITDA grew 4% YoY to INR8.1b (in-line), as the benefit of lower fuel cost/higher merchant prices was diluted by the impact from new CERC regulation in hydro assets.

• Generation at the standalone level declined ~13% YoY to 2.6BU. Realization was flat YoY (-4% QoQ) at INR4.37/kWh, even as fuel cost declined ~11% YoY to INR3.14/kWh. It benefited due to the lag between the decline in fuel cost and the tariff in Ratnagiri's Maharashtra PPA, and higher merchant prices.
• Hydro's generation was up ~30% YoY. However, EBITDA was flat YoY at ~INR3.3b. The new CERC norms effective 1st Apr'19 have had an impact of ~INR0.4b YoY. Annual impact of new norms is estimated at ~INR1.2b.
• Finance cost declined 14% YoY to INR2.7b. Adj. PAT increased ~7% YoY to INR2.4b (our estimate: INR2.2b).