Buy JSW Energy; target of Rs 592: Motilal Oswal

Motilal Oswal research report on JSW Energy

JSWE’s 4QFY25 revenue was 16% below our estimate. at INR31.8b (+16% YoY) as EBITDA came in at INR 12b (+3% YoY), 8% below our estimate. The weakness in 4QFY25 earnings performance was primarily driven by softer performance at the Ratnagiri and Barmer thermal power plants, where net generation declined by 7% and 11% YoY, respectively. Additionally, standalone EBITDA margins remained under pressure despite the benefit of lower fuel costs, as higher employee expenses and elevated other operating costs offset these gains.

Outlook

JSWE has completed the acquisition of both KSK Mahanadi and O2 Power, which should drive EBITDA growth in FY26. Further, Vijaynagar plant capacity is now fully tied up under a PPA, thus bringing down merchant exposure to below 1GW, with imported coal dependence now limited to only 9-10%. This too should contribute to lowering earnings volatility. In 1QFY26, JSWE signed a PPA with UPPCL for another 12 GWh pumped storage project, targeted for delivery over the next six years. Overall, JSWE has set a roadmap to reach 30GW of total generation capacity and 40GWh of energy storage by 2030. By FY30, JSWE expects EBITDA to grow by 2.7x to 3x compared to pro forma FY25 levels. This growth will be supported by planned capex of INR 1,300b between FY26 and FY30. While power demand growth has weakened to 2% in Apr’25 and the stock could remain under pressure in the near term, we maintain BUY with a revised TP of INR 592/share.