JSW Energy Ltd. | Q2FY15 Result Update | Below consensus:: IndiaNivesh

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Short term power sales for the quarter stood at about 1947 mn unit (37% of total
generation) vs 2694 mn unit in Q1FY15. Despite higher fuel cost along with higher
other expenditure EBITDA margin improved 224 bps QoQ to 37.7% against street
expectation of 35.8% primarily due to nil banked energy during the quarter. Fuel
cost increased 843 bps QoQ due to higher proportion of imported coal. Depreciation
increased by 3.5% QoQ to Rs 2.01 bn whereas interest cost decreased 1.5% QoQ to
Rs. 2.8 bn.
Quick Fundamentals

Net generation increased by 5% QoQ
Net generation increased by 5% QoQ to 5.23 bn units due to pick up in demand.
Though, PLF has improved YoY basis (average PLF 87% vs 76% Q2FY14) due to
demand pick up but on QoQ basis it remain under pressure (92% in Q1FY15). Barmer
achieved PLF of 88% vs. 78% in Q2FY14. Vijayanagar plant operated at PLF of 92%
(v/s 98% q-o-q & 78% y-o-y), Ratnagiri operated at PLF of 82% (v/s 68% q-o-q & 74%
y-o-y). Short term power sales for the quarter stood at about 1947 mn unit (37% of
total generation).
EBITDA margin expanded by 224 bps QoQ
 Absence of banked energy helped in 224 bps QoQ improvement in EBITDA
margin to 37.7% despite increase in fuel cost and other expenditure from last
quarter. Fuel cost increased (as% of sale) 843bps QoQ to higher proportion of
imported coal. Other expenditures increased by 72 bps q-o-q to Rs 1.25 bn.
 Depreciation increased by 3.58% QoQ to Rs 2.01 bn whereas interest cost
decreased 1.5% QoQ to Rs. 2.8 bn. Reported net profit stood at Rs. 3.18 bn,
jumped by 96% YoY (down 2.1% QoQ) led by higher other income. Other
income increased by 120% YoY and 189% QoQ to Rs 1.2 bn which includes Rs
722.5 mn received against settlement claim against vendor. Further the
company has made provision for estimated loss of Rs. 303 mn arising as a
result of impairment of assets of South African subsidiary. Adjusted PAT
(excluding impact of exceptional item) stood at Rs. 2.29 bn below consensus
of Rs. 3 bn.
Valuation
JSWEL is a key beneficiary of current downturn in international coal prices. Further
volume gain due to new capacity addition is key positives but uncertainty regarding
fuel supply and higher merchant exposure are key risk for the stock. At CMP of
Rs 80 the stock is trading at 1.6x FY16E BV. We don’t have any formal rating on the
stock.

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http://www.indianivesh.in/Admin/Upload/635506023933290000_JSW%20Energy%20_Q2FY15%20Result%20Update.pdf