MOSL: JSW ENERGY (Neutral)-Operationally better-Deleveraging continues; EV remains an overhang

JSW Energy: Operationally better; Deleveraging continues; EV remains an overhang; Maintain Neutral

(JSW IN, Mkt Cap USD1.5b, CMP INR68, TP INR72, 6% Upside, Neutral)

• JSW Energy’s (JSWE) EBITDA was down 2% YoY to INR8.6b, but ~9% ahead of estimate. Generation increased ~9% YoY to 6.7BU, but higher fuel costs offset the gains. Interest cost is down ~21% YoY (-1% QoQ) as it continues to deleverage. Net debt (incl. acceptances) has reduced by ~INR9.8b to INR120b in 1H, as FCF generation is used to repay debt. Other income of INR1.4b (est. 0.9b) was aided by late payment surcharge income (non-recurring). PAT has increased 6% YoY to INR3.2b (est. 2.2b) on interest cost savings.
• Share of long-term PPAs has increased to 80%. It signed additional 236MW PPAs under group captive in the quarter. It will improve the stability and predictability of earnings.
• Planned FY19 capex for EV is deferred as plans are taking time to firm up, while solar is dropped for now due to regulatory uncertainty.
• The company is in discussion with DISCOMs for a PPA for its under-construction 240MW Kutehr hydro project. It is hopeful of securing a PPA before the end of the fiscal year. The construction would take four years from the signing of the PPA.