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Healthy Q3; execution on track

Robust generation, strong merchant volumes drive earnings

JSW Energy’s (JSW IN) Q3 revenue rose 13.1% YoY to INR 25.4bn, led by higher thermal generation, contribution from acquired and greenfield RE capacity additions. Total renewable generation rose 71% YoY to 1.4Bus, and total thermal generation 37% YoY to 4.7Bus. Hydro generation declined by 30% YoY in Q3

Merchant volume increased to 887MU in Q3 from 95MU last year. Merchant tariff prices averaged at INR 5/unit in Q3, up 10% YoY. EBITDA increased a substantial 78% to INR 11.1bn, led by incremental contribution from renewables portfolio and strong thermal performance. Net generation from acquired RE portfolio rose 16% YoY, resulting in an EBITDA of INR 2.01bn. Profit after tax increased 24% YoY to INR 2.3bn in Q3.

Brownfield thermal expansion on cards

JSW commissioned 51MW of SECI IX (810MW) in Q3FY24. It has successfully synchronized Unit 1 (350MW) of Ind Barath in January 2024. Tunneling work is completed for Kutehr HEP and barrage concreting is 86% completed. The management is focused on executing under-construction projects within the guided timeline. It guided for 4,000MW brownfield thermal expansion at Ind-Barath, with another 1,200-1,400MW anticipated in Rajasthan (addition in phased manner)

JSW is on track to scale up installed capacity to ~10GW by March 2025, with ~60% share of green installed capacity. JSW is targeting 20GW by 2030, including 40GWh/5GW energy storage, 1GW Wafer, cell and module W-C-M manufacturing, and ~3,800TPA GH2.

Valuations: Maintain Sell, TP raised to INR 381

At the current market price, JSW is trading at 26x FY26E P/E and 12.8x FY26E EV/EBITDA. We maintain Sell, given expensive valuations. We arrive at a raised TP of INR 381 (from INR 333), based on FY26E EV/EBITDA of 9x for its thermal business, and 11x EV/EBITDA for its renewable business. We ascribe an option value of INR 34 /share for storage projects.

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SEBI Registration number is INH000000933