Hold JSW Energy; target of Rs 72: Edelweiss

Edelweiss recommended hold rating on JSW Energy with a target price of Rs 72 in its research report dated July 27, 2018.

Broker Research

September 18, 2018 / 14:14 IST

Edelweiss' research report on JSW Energy

JSW Energy posted EBITDA 10% below our estimate due to higher fuel cost. Key highlights:1) Net generation dipped 5% YoY owing to weaker hydro generation (down 35% YoY on account of lower water levels in the Sutlej basin) that was partially offset by higher generation at Ratnagiri (up 31% YoY) aided by greater merchant offtake. 2) The benefit of higher merchant prices was more than offset by the spike in fuel cost (up 24% YoY) due to rising international coal prices and a depreciating rupee. Consequently, EBITDA dipped 11% YoY. 3) Ratnagiri Unit 2 has been brought under group captive capacity, which affords more flexibility at the plant level to leverage the merchant market. On the EV front, the budgeted investment of USD150mn (USD1bn committed overall) might spill over to next year owing to a delay in strategy formulation.

Outlook

We maintain the cautious stance on the company due to its unrelated diversification. Maintain ‘HOLD’ with revised TP of INR72(INR75 earlier).

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