JSW Energy announced its December ending quarter results on Friday after market close.
For Q3 FY22, the power major reported ₹2,248 crore of revenue from operations. The company’s EBITDA of ₹624.93 crore missed the Bloomberg consensus estimates by around 19 per cent, while net profit of about ₹180 crore missed the estimates by 40 per cent.
During the reporting quarter, the company witnessed a reduction in the net generation by around 5 per cent on account of lower merchant market sales, while generation for long-term PPA was flat on a y-o-y basis.
While the company maintained its thermal PLF at 68 per cent levels, its hydro PLF slipped to 24 per cent from 27 per cent last year which is due to lower water flow in Q3 FY23 as per the management.
The company reported about 18 per cent rise in its revenue from operations compared to Q3 FY22 due to recognition of additional realisation of ₹307 crore to the revenue on account of order passed by APTEL with respect to the company’s Barmer plant.
Its EBITDA fell around 20 per cent and, thus, its EBITDA margin contracted to 28 per cent from 42 per cent on a y-o-y basis due to lower short-term sales and tariff (which management guided earlier) and higher fuel cost. The company has a strong cash position of ₹3,029 crore and a comfortable net debt to EBITDA level of about 2.3 times.
Outlook and valuation
Currently, the firm has an operational installed power generation capacity of 4.8 GW which it targets to increase to 10 GW by 2025 with 61 per cent of renewable energy (RE) share from the current levels of 34 per cent.
According to the management, the transaction of acquiring Mytrah RE asset portfolio of 422 MW solar and 1,331 MW wind is expected to achieve closure by Q4 FY23 while the company has completed the acquisition of 700 MW thermal assets of Ind-Barath, which are expected to be commissioned within 24 months.
The company currently trades at around 28 times its one year forward earnings (Bloomberg consensus estimates) which is about 35 per cent higher than its historical five-year average P/E, while its one year forward EV/EBITDA is around 11.5 times, up from its five-year average by 25 per cent. The firm is currently trading at one of the highest valuations in the power generation space.
Though the company has a strong balance sheet and margins than many of other industry peers, its valuations are stretched. Hence, we maintain our sell recommendation for the stock of JSW Energy given in our bl.portfolio edition dated December 25, 2022.
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