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IDBI Capital
CMP: Rs 44.95
Target: Rs 41
Net generation was 12 per cent lower than our estimate at 4.4 billion units (-6 per cent y-o-y / -15 per cent q-o-q) due to weak demand and maintenance shutdown of units at Vijaynagar plant.
Consolidated profit after tax (PAT) was 36 per cent lower than our estimate at Rs 160 crore due to revenue miss (Rs 1,990 crore against IDBI estimate of of Rs 2,400 crore) and higher than expected forex loss of Rs 170 crore.
The stock is up about 20 per cent in the past two months due to the sharp appreciation in rupee against the dollar and is currently trading at 1.1x FY14/15 book value. Given the weak earnings profile (-3 per cent compound annual growth rate over FY13-15E) and deteriorating return ratios (Average return on equity of 11.8 per cent over FY14-FY15 compared with 15 per cent in FY13), we believe the valuations are rich. Consequently we downgrade JSW Energy to ‘Reduce’ from ‘Hold’.
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