IGI Logo

Benefited from merchant sales

JSW Energy’s (JSWEL) Q3FY22 consolidated revenues, EBITDA, reported PAT came in at Rs18.9bn, Rs7.9bn, Rs3.2bn (+17.7%, +31%, +162% YoY) respectively. Net generation was 2.5% lower YoY as thermal generation declined 5% while hydro increased 13%. JSWEL benefited from higher exchange prices due to its low-cost thermal coal inventory and 13% untied capacity. Short-term sales in Q3FY22 were up 3.5% YoY at 323MUs, and contributed a staggering Rs2.1bn additional EBITDA YoY. Company is confident of commissioning 225MW RE capacity in Q4FY22, which will start its transition from a majority coal to a majority green player. It expects its business reorganisation process to be completed in FY23. Over the next few years, the company is keenly looking to leverage its balance sheet strength further and invest in several new-age renewables businesses including large-scale green hydrogen and hydropumped storage, all of which will be housed in the new RE entity. Maintain SELL.

* Higher merchant sales boosted profits: Consolidated generation increased 2.5% YoY to 4,496MUs. Volumes at Vijayanagar and Barmer increased 43.6%/0.4% YoY, but Ratnagiri volumes declined 26.7% YoY as one unit was under maintenance. Short-term sales in Q3FY22 were up 3.5% YoY at 323MU, and JSWEL benefitted from the high merchant tariffs, which contributed an additional Rs2.1bn to its Q3FY22 EBITDA over that of Q3FY21. There was a one-time gain of Rs1bn due to prior-period sales – adjusting which, PAT was Rs2.5bn, up 101.5% YoY. Receivables declined 23% QoQ and 20% YoY to Rs13.6bn, helping increase cash balance to Rs22bn. Net debt and weighted average cost of debt stood at Rs60.2bn and 7.82%, respectively.

* Projects progressing well; 225MW capacity to be commissioned in Q4FY22: 2.5GW of green projects with total capex of Rs167bn are currently under construction with a blended tariff of Rs3.08/unit, to be commissioned in parts over FY22-FY24, starting with 225MW in Q4FY22. Around 60% of tunnelling work for the Kutehr project is complete.

* Business reorganisation to be completed in FY23: Post the receipt of Board approval for the reorganisation of the company’s green and grey businesses, JSWEL is pursuing the necessary approvals and has filed its scheme of amalgamation for merger of JSW Future Energy with JSW Neo Energy with NCLT. Management expects the process to be completed in FY23. JSWEL is expected to become one of the largest green hydrogen players in the country and will put up the proposal for setting up a large commercial green hydrogen project to the Board soon. It also plans to set up large hydro pumped storage projects, and has signed MoU with the government of Maharashtra for a 1.5GW project and signed LoI with Rajasthan for a 1GW project in this respect. It has also signed MoU with Rajasthan for development of 10GW of RE resources.

* Improved overall thermal generation scenario bodes well for near-term earnings: We maintain SELL on the stock, but increase our target price to Rs175 (earlier: Rs156). We factor improved performance of the standalone business into our estimates as the overall improved scenario of thermal generation in the country is expected to continue for the next few years. While thermal PLFs continue to be high due to increase in power demand, 44.3% increase in average power prices on exchange during 9MFY22 over FY21 has resulted in increased contribution from thermal plants. Further, change of status of three units of Ratnagiri plant to captive is expected to lower uncertainties of its untied capacity and result in better PLFs, hence higher profitability.

To Read Complete Report & Disclaimer Click Here

For More ICICI Securities Disclaimer https://www.icicisecurities.com/AboutUs.aspx?About=7

Above views are of the author and not of the website kindly read disclaimer