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Investment Rationale

* Acquisition of RE platform from O2 Power: JSWE on 9 th Apr’25 informed that it has completed the acquisition of 4,696 MW of RE platform from O2 Power. 2,259 MW of the O2 power assets are to be operationalised by Jun’25 and will contribute to a steady state EBITDA of Rs 1,500 Cr. Additionally, Rs. 13,500 Cr of capital expenditure will be incurred to reach the total operational capacity of 4,696 MW by Jun’27 post which the platform will have a steady state annualised EBITDA of Rs 3,750 Cr. The O2 power assets have a blended tariff of Rs 3.37/KWh with high-quality off-takers like SECI, SJVN, and NTPC.

* Acquisition of KSK Mahanadi: As of 4 th March 2025, JSWE has completed the acquisition of KSK Mahanadi Power Company Limited. KSK Mahanadi’s 1,800 MW is fully operational and tied up.

* Capacity Expansion: During Q4FY25, the company commissioned 284 MW of wind projects, 350 MW of the Utkal Unit-2 plant and completed the acquisition of 1,800 MW of the KSK Mahanadi Thermal Plant. Total operational capacity stood at 10.9 GW at the end of Q4FY25 (vs 8.1 GW during Q3FY25). The company’s consolidated installed capacity is expected to be 14 GW by Jun’25. Its locked-in capacity has increased to 28.3 GW and is on track to achieve its target of 20 GW of installed capacity before the initial guidance of 2030.

* Good results expected: In Q4FY25, JSWE's Revenue/EBITDA is expected to grow YoY/QoQ (Revenue to grow 16.8% YoY and 31.9% QoQ while EBITDA to grow 10.1% YoY and 40.9% QoQ), led by improvement in power generation, addition of operational capacity and increase in merchant tariffs.

* Pick-up in power demand: Cumulative all-India electricity demand over Jan-Mar'25 stood at 416 BU as compared to 400 BU for the same period last year. In Q4FY25, electricity demand improved with the early onset of summer and peak demand reaching up to 238 GW during Q4FY25 in Feb’25 (vs. 224 GW during Q4FY24 in Jan'24). Improvement in demand is also reflected in improved merchant prices, as IEX DAM prices in Q4FY25 stood at Rs 4.4/KWH vs 3.7/KWH during Q3FY25. The company has ~28% of its portfolio available for sale in merchant markets and is expected to benefit from the increase in DAM Prices.

Valuation & recommendation:

* JSWE has an aspiration to reach 20 GW of generation and 5 GW/40 GWh of energy storage capacity by FY30 under its strategy 2.0 plan. After recent acquisitions, its locked-in capacity has increased to 28.3 GW. We believe that with the recent price corrections and expected pick-up in demand in the summer, the current CMP provides a good entry point. We recommend a BUY rating on the stock with a target price of Rs 530/share, implying an upside of 10% from the CMP.

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