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JSW Energy (JSWE.BO)
Neutral Equity Research
Below expectations: Reduction of spot coal exposure key for FY12E
What surprised us
JSW Energy (JSWE) reported PAT of Rs8.4 bn vs our estimate of Rs10.8bn
and Bloomberg consensus of Rs9.7bn, primarily on account of 1) Rs350
mn of under-recoveries recognized on its Rajasthan power plant pending a
true-up petition; 2) a 7% decline in volumes vs our estimate due to delayed
commissioning of Ratnagiri power plant; and 3) higher costs – 5% above
our estimates due to rising international coal prices. Merchant realizations
for 4QFY11 are Rs4.71/kwh vs 4.79/kwh yoy – in line with our expectations.
Sales on merchant mechanism declined to 67% vs 71% yoy.
JSWE guided that merchant realizations will be at similar levels for FY12E
vs our estimate of Rs4/kwh, and merchant sales for FY12E will be at 50% of
overall sales. Further, JSWE indicated that it expects about 3.5MT of coal
for FY12E from Indonesian and South African mines, thereby reducing
their total spot exposure to 35% in FY12E (versus GS est. of 50%) from
90% currently. However, we wait to see more visibility on actual deliveries
before building in JSWE’s estimates in our forecasts.
What to do with the stock
We reiterate our Neutral rating on JSW Energy with a revised DCF-driven
SOTP 12-month price target of Rs77 (from Rs80). We believe the visibility
on coal deliveries under the group’s long-term contracts, thereby reducing
the spot exposure, will be key for stock re-rating. We adjust our earnings
estimate for FY11 in line with reported results and fine tune our FY12E/13E
estimates. We are 30% below consensus and movement of coal prices
either upwards/downwards is key risk to our TP.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JSW Energy (JSWE.BO)
Neutral Equity Research
Below expectations: Reduction of spot coal exposure key for FY12E
What surprised us
JSW Energy (JSWE) reported PAT of Rs8.4 bn vs our estimate of Rs10.8bn
and Bloomberg consensus of Rs9.7bn, primarily on account of 1) Rs350
mn of under-recoveries recognized on its Rajasthan power plant pending a
true-up petition; 2) a 7% decline in volumes vs our estimate due to delayed
commissioning of Ratnagiri power plant; and 3) higher costs – 5% above
our estimates due to rising international coal prices. Merchant realizations
for 4QFY11 are Rs4.71/kwh vs 4.79/kwh yoy – in line with our expectations.
Sales on merchant mechanism declined to 67% vs 71% yoy.
JSWE guided that merchant realizations will be at similar levels for FY12E
vs our estimate of Rs4/kwh, and merchant sales for FY12E will be at 50% of
overall sales. Further, JSWE indicated that it expects about 3.5MT of coal
for FY12E from Indonesian and South African mines, thereby reducing
their total spot exposure to 35% in FY12E (versus GS est. of 50%) from
90% currently. However, we wait to see more visibility on actual deliveries
before building in JSWE’s estimates in our forecasts.
What to do with the stock
We reiterate our Neutral rating on JSW Energy with a revised DCF-driven
SOTP 12-month price target of Rs77 (from Rs80). We believe the visibility
on coal deliveries under the group’s long-term contracts, thereby reducing
the spot exposure, will be key for stock re-rating. We adjust our earnings
estimate for FY11 in line with reported results and fine tune our FY12E/13E
estimates. We are 30% below consensus and movement of coal prices
either upwards/downwards is key risk to our TP.
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