Friday, July 22, 2016

JSW Energy Ltd: Buy
CMP: Rs.79.50
JSW Energy  Ltd came out with decent set of numbers for the Q1FY17, with with the profit rising 28.6% sequentially to Rs.366.5 crore on lower revenue growth. After adjusting numbers due to new accounting standards, profit in Q4FY16 stood at Rs 285 crore against Rs 305.43 crore (before the adjustment). 

Revenue during the quarter fell marginally by 6.9% to Rs.2,450 crore compared with Rs.2,630.7 crore in preceding period. Operating profit (EBITDA - earnings before interest, tax, depreciation and amortisation) increased 3.7% quarter-on-quarter to Rs.1,117 crore and margin expanded by a whooping 470 basis points to 45.6% in Q1FY17.

The company has highest net power generation of 6,648 million units in Q1FY17 against 4,480 million units in same period last fiscal, primarily due to generation from hydro power plants acquired during FY16 and improved performance of Ratnagiri plant (Maharashtra). 

It was partly offset by shut downs at Vijaynagar and Barmer plants due to maintenance and low scheduling of power since June. 

Meanwhile, JSW Energy said it has withdrawn from the acquisition process of Monnet Power, which is positive from the shareholders' point of view. 

Moreover, JSW Energy Ltd which reported 18.7% increase in consolidated net income at Rs.366.53 crore for the June, 2016 quarter, is planning to acquire around Rs.5,000 crore worth of stressed assets. "The company has acquired assets worth Rs 12,000-13,000 crore in the last 2-3 years and it is currently evaluating 8-9 projects. Currently, our focus will be on growing our hydel portfolio. We will also consider opportunities in the wind and solar sector, but that will be at a later stage ", JSW Energy Ltd's Chairman Sajjan Jindal told reporters on the sidelines of the company's AGM. The forecast of good monsoon has already raised the prospects of hydel power plants in India. 

JSW Energy, which has bought two hydel power projects of the debt-ridden Jaiprakash Power Ventures in Himachal Pradesh, including the 300-mw Baspa-II and 1,091-mw Karcham Wangtoo, for Rs 9,700 crore, is looking at expanding its hydel portfolio through acquisitions. 

The investors can buy the stock at the CMP of Rs.79.50, for a short term target of Rs.86 - 87. In case of short term trade, please do keep a SL of Rs.76.
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