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MOSL: JSW ENERGY (Neutral)-Lower merchant volumes impact performance

JSW Energy: Lower merchant volumes impact performance

(JSW IN, Mkt Cap USD1.5b, CMP INR63, TP INR71, 12% Upside, Neutral)

 

Capital allocation is key; Maintain Neutral

• JSWE's results highlight the impact of lower merchant volumes and prices amidst subdued power demand. EBITDA declined 14% YoY in 3QFY20.
• The company remains keen on tie-up of capacities, but the cancellation of the pilot scheme PPA and the delay in the commissioning of Dolvi will push back the same. Details/successful closure of proposed acquisitions are still awaited. Maintain Neutral. 

Operational performance impacted by lower merchant volumes

• EBITDA declined 14% YoY to INR6.4b (our estimate: INR6.0b) on the back of lower merchant volumes. Interest cost though declined 11% YoY to INR2.6b led by debt repayment. PBT was down 31% YoY at INR1.5b. Adj. PAT declined ~12% YoY to INR1.3b (our estimate: INR0.6b).
• Standalone generation was down ~14% YoY at 2.6BU on the back of lower short-term (ST) sales volumes. ST volumes almost halved to 541MUs from 1,112MUs in the year-ago period.
• Hydro's generation was ~6% higher YoY and helped offset the impact of new CERC norms. Hydro EBITDA was up 2% YoY at INR1.7b (8% beat).
• EBITDA at JSW Barmer was up 2% YoY at INR2.8b.
• Reported PAT stood at INR3.9b. JSWE has re-evaluated its DTL on assumption of migration to the new tax regime (albeit at a later date). This has led to a write-back of INR1.7b during the quarter. In addition, there were gains of INR0.6b on restructuring of JPVL loan.