EUR 120.00 For Business Accounts Only

MOSL: JSW ENERGY (Neutral)-Lower fuel cost, higher hydro gen. aid earnings; Visibility on earnings improving

JSW ENERGY: Lower fuel cost, higher hydro gen. aid earnings; Visibility on earnings improving; Maintain Neutral

(JSW IN, Mkt Cap USD1.6b, CMP INR70, TP INR76, 8% Upside, Neutral)

JSW Energy's (JSWE) EBITDA increased 9% YoY to INR9.4b (our estimate: INR9.8b) in 2QFY20, led by lower fuel cost and strong hydro generation, partly offset by the impact from the new CERC norms. PBT grew 21% YoY to INR4.8b on the back of a decline in finance cost (-12% YoY), while adj. PAT was up ~12% YoY to INR3.5b (our estimate: INR3.7b).

• Standalone generation was up ~1% YoY to 2.5BU. Realization was down 12% YoY (-INR0.6/kWh) to INR4.37/kWh. Fuel cost declined ~19% YoY (-INR0.7/kWh) to INR3.12/kWh. In our view, this was driven by some benefit from the lag between the decline in fuel cost and tariff in Ratnagiri Maharashtra PPA. Volumes from Telangana PPA (300MW from 1st July) were low. However, tariff related to the back down has not been recognized.
• Hydro's generation was ~9% higher YoY and helped offset the impact from the new CERC norms. Hydro EBITDA declined 3% YoY to INR4.9b (7% beat).
• EBITDA at JSW Barmer was up 22% YoY to INR2.7b, as the previous year had an impact of INR0.5b related to certain tariff true ups.