Motilal Oswal Neutral on JSW Energy

Motilal Oswal has maintained neutral rating on JSW Energy with a target price of Rs 69 in its January 24, 2013 research report.

“JSW Energy (JSWEL) reported consolidated PAT of INR3.1b for 3QFY13, including forex loss of INR610m. Adjusted PAT was INR3.7b, higher than our estimate of INR1.7b. The key deviation has been 10% QoQ and 18% YoY decline in fuel cost (saving of INR0.30/unit QoQ) on standalone basis. Gross margin has improved to INR2.6/unit from INR2.2/unit in 2QFY13. Fuel cost saving was due to better operational efficiency (higher PLF leading to better heat rate, lower auxiliary consumption, etc), as also due to higher usage/blending of low calorific coal in 3QFY13 (66:34) v/s 2QFY13 (27:73).”

"JSWEL's net generation during the quarter was 4.77BU (up 20% YoY). Higher generation was led by better operating rate (PLF) of the 860MW Karnataka plant at 102% (v/s 85% in 3QFY12), the 1,200MW Ratnagiri plant at 88% (v/s 83% in 3QFY12) and the 540MW Raj West plants at 81% (v/s 74% in 3QFY12). Higher generation and tariff revision (applicable from October 2012) led to significant improvement in EBITDA for Raj West on QoQ basis. The management expects the final tariff order for Raj West to come by the end of FY13."
 
“Given the lumpiness in earnings owing to business model and no growth option in the near term, valuations of 12x FY15E EPS and 1.5x FY15E BV (RoE of 14%) offer limited comfort. We raise our target price marginally from Rs 65 to Rs 69 and reiterate our neutral recommendation,” says Motilal Oswal research report.

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