JSW Energy - Maintain SELL - Limited Growth Visibility - Karvy

Muted topline on lower Generation, Lower Fuel cost improved profitability

The revenues of JSW Energy (JSWEL) increased by 11% YoY to Rs. 23.0 bn in Q4FY13 (our expectation of Rs. 21.5 bn) - primarily due to higher merchant rates. Its EBITDA grew 40% yoy from Rs 5.8 bn in Q4FY12 to Rs. 8.5 bn in Q4FY13. The fuel cost stood at Rs. 2.05 per unit in Q4FY13 vs Rs 2.15 per unit in Q3FY13 (vs. Rs. 2.37 per unit in Q4FY12) lower due to sharp fall in imported coal price. Company reported net profit of Rs. 3.5 bn (vs. PAT of Rs. 2.2 bn in Q4FY12) in Q4FY13.

For the FY13, company has posted a net profit of Rs. 9.0 bn at 431% yoy as compared to Rs. 1.7 bn in FY12. Total Income has increased by 46% from Rs. 62 bn for the year FY12 to Rs. 91.4bn for the FY13 on the back of higher generation by 38% at 18.8 bn units.

Generation: Net generation was flat at 4,686 MU in Q4FY13, driven by lower PLF at 85.5%. Vijayanagar units maintained at a high PLF of 101% in Q4FY13 vs 102% in Q4FY12 while the PLFs for Ratnagiri (vs. 85% in Q4FY12) & Barmer (vs 80% in Q4FY12) were 82% and 73%, respectively, in Q4FY13. Generation of Ratnagiri plant was lower primarily due to unscheduled shutdown of Unit-1 for attending to technical issues and frequent request for backdown during off-peak hrs while Barmer PLF suffered due to the stablisation of the additional operational capacity.

Valuation & Outlook:

JSW Energy (JSWEL) has outperformed the Sensex by 31% over 12 months due to decline in global coal prices by 24%. However, JSWEL continues to remain exposed to imported spot market and merchant power rates, resulting in earnings volatility. At the CMP, the stock trades at 13x P/E, 7.6x EV/EBITDA & 1.4x FY15E P/B with 13% RoE in FY15E. Based on our DCF valuations for individual projects, We maintain our TP Rs. 57 per share implying an 1.2x PB on FY15E.

Source : Equity Bulls

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