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4QFY11 result
JSW Energy’s 4Q results were ahead of our estimates mainly due to higher
than expected realization and lower taxes. Both Barmer and Ratnagiri projects
are delayed from their earlier commissioning schedules and Barmer (the first
two units) actually reported losses in FY11 due to lower availability. The fuel
cost in 4Q was at Rs2.8/kWh – highest in our coverage universe. We are
upgrading FY12 net profit by 17% to factor in strong first quarter (expected)
which is seeing very high tariffs driven by elections in South India. We remain
cautious on the stock given its high exposure to spot thermal coal and very
high leverage to short term tariffs. Underperform.
4Q average tariff ahead of estimates
JSW Energy 4Q net profit at Rs2bn, down 26% YoY, was ahead of our estimates
due to higher than expected realization and lower taxes. The fuel cost increased
to Rs2.8/kWh during the quarter – highest ever – with the company buying a
substantial amount of coal from the spot market. Overall cost of generation was
Rs4.04/kWh including interest and depreciation.
More delays at Barmer and Ratnagiri
Barmer project (regulated return project) continues to face delays and the
company is now targeting to commission the project by end of FY12. The existing
two units (of 135MW each) are operating below the norms and the company
incurred a loss of Rs100m and Rs350m for the 4Q and full year respectively. The
commissioning of Ratnagiri’s third and fourth unit is also delayed by couple of
months.
Coal supplies remain a concern
JSW Energy’s business model continues to remain vulnerable to spot thermal coal
prices. The company is unable to secure coal from its earlier agreement with PT
Sengai Belati (Indonesia) given the ongoing dispute regarding the overlapping
mining lease with another mining licence holder. The recent CIC Energy
acquisition (not consummated yet) is also under clouds given that Botswana
government had declined to renew one of its two mining licenses. We however
note that JSW Energy would have received coal from these mines only after 6-7
years.
17% upgrade in FY12 profit -factoring in strong 1Q/lower interest
We have upgraded the FY12 profit by 17% to factor in a strong 1Q (expected) –
mainly driven by higher tariffs due to elections in the southern states and lower
interest expenses. The leverage to merchant tariff assumption remains very high
for the company - Rs0.5/kWh increase results in 36% increase in profit for FY12.
Our DCF based target price is now Rs80/sh and after the recent correction we are
changing our recommendation from SELL to Underperform.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
4QFY11 result
JSW Energy’s 4Q results were ahead of our estimates mainly due to higher
than expected realization and lower taxes. Both Barmer and Ratnagiri projects
are delayed from their earlier commissioning schedules and Barmer (the first
two units) actually reported losses in FY11 due to lower availability. The fuel
cost in 4Q was at Rs2.8/kWh – highest in our coverage universe. We are
upgrading FY12 net profit by 17% to factor in strong first quarter (expected)
which is seeing very high tariffs driven by elections in South India. We remain
cautious on the stock given its high exposure to spot thermal coal and very
high leverage to short term tariffs. Underperform.
4Q average tariff ahead of estimates
JSW Energy 4Q net profit at Rs2bn, down 26% YoY, was ahead of our estimates
due to higher than expected realization and lower taxes. The fuel cost increased
to Rs2.8/kWh during the quarter – highest ever – with the company buying a
substantial amount of coal from the spot market. Overall cost of generation was
Rs4.04/kWh including interest and depreciation.
More delays at Barmer and Ratnagiri
Barmer project (regulated return project) continues to face delays and the
company is now targeting to commission the project by end of FY12. The existing
two units (of 135MW each) are operating below the norms and the company
incurred a loss of Rs100m and Rs350m for the 4Q and full year respectively. The
commissioning of Ratnagiri’s third and fourth unit is also delayed by couple of
months.
Coal supplies remain a concern
JSW Energy’s business model continues to remain vulnerable to spot thermal coal
prices. The company is unable to secure coal from its earlier agreement with PT
Sengai Belati (Indonesia) given the ongoing dispute regarding the overlapping
mining lease with another mining licence holder. The recent CIC Energy
acquisition (not consummated yet) is also under clouds given that Botswana
government had declined to renew one of its two mining licenses. We however
note that JSW Energy would have received coal from these mines only after 6-7
years.
17% upgrade in FY12 profit -factoring in strong 1Q/lower interest
We have upgraded the FY12 profit by 17% to factor in a strong 1Q (expected) –
mainly driven by higher tariffs due to elections in the southern states and lower
interest expenses. The leverage to merchant tariff assumption remains very high
for the company - Rs0.5/kWh increase results in 36% increase in profit for FY12.
Our DCF based target price is now Rs80/sh and after the recent correction we are
changing our recommendation from SELL to Underperform.
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