JSW Energy :Poised to scale up, but a tad overvalued: Nomura Research

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JSW Energy: Positives in the price ::Kotak Sec, report

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Positives in the price. With a quarterly profit of `3.8 bn, JSW Energy’s CMP already factors the sharp improvement in earnings, considering (1) low fuel cost because of declining prices of imported coal, (2) sustained merchant tariffs with standalone realizations at `4.3/kwh, and (3) improved utilization rates with 86% PLF during the quarter. Potential capital-raising to fund inorganic growth could keep stock performance in check while further growth on existing capacities may be hard to come by. Maintain SELL with a revised PT of `81/share (`73 previously).
 
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JSW Energy - Ideally Placed to Encash on Growth; Result Update Q3FY15 ::Edelweiss

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In a sweet spot JSW Energy’s 3QFY15 :: HDFC Securities

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JSW Energy (Update) : Good but not a great deal. Maintain NEUTRAL :: HDFC Sec, link

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

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Technicals-Jindal Saw, JSW Energy, GVK, KPIT , CESC, Castrol, Unitech :: Business Line

Query Corner:: Omaxe, Unitech, Amara Raja Batteries, Firstsource Solutions, Orient Paper, JSW Energy: Business Line

UTILITIES: July-12 Forward maintained at INR4/unit+ ::Motilal oswal

Positive for JSW Energy
Company /
Industry analysis
 CERC released forward curve date for Short term (ST) prices for July-12. Contracted
volume for the month stood at 636MUs, down 72% MoM. Average monthly
contracted volume for 1QFY13 and FY12 stood at 2.7BUs and 2.6BUs respectively.
Lower contracted volume in bilateral category could have been led by higher ST
tariff (INR4/unit+) in the market. However we understand ST tariff has seen
uptrend in all categories of ST power.
 During the month, 66% of total volume has been contracted at price more than
INR4/Unit v/s 36% MoM and an average of 25% in 1QFY13.
 We note that the tariff curve for the contacts executed in July-12 has maintained
at INR4/unit +. Bilateral power delivery in August/Sept has moved up marginally
by ~1-4paise per unit. Sustenance of tariff is led by muted monsoon, lower hydro
generation (source of peak power).
 For FY13, amongst our coverage universe, JSW Energy (Buy) and Adani Power
(Neutral) have the highest sensitivity to merchant prices and is expected to sell
~50% and ~25% of their generation at merchant tariffs respectively.
 Valuations and view: We have modeled merchant tariff rates of INR3.5/unit in
FY13; down from INR4.0/unit in FY12. For FY13, amongst our coverage universe,
JSW Energy (Buy) and Adani Power (Neutral) have the highest sensitivity to
merchant prices and are expected to sell 50% and 25% of their generation at
merchant tariffs respectively. JSW energy would remain key beneficiary of falling
coal prices and firm ST prices.

TP: INR65 Buy JSW Energy-- Motilal oswal,

 1QFY13 adjusted PAT higher than estimates: During 1QFY13 adjusted PAT stood at INR1.9b v/s our estimate of
INR1.6, consolidated PAT boosted by higher generation. JSWEL reported forex loss of INR2.3b pertaining MTM
on Buyer's credit availed from bank (USD442m as at Jun-12) towards coal imports and is marked at INR56/USD
as at June 2012. Subsidiaries performance was impacted by one-off charges as accelerated depreciation of
INR100m led to losses of INR200m at SACMH and at Jaigad transmission, company booked reversal of arrears
of INR240m. Raj West recorded improvement in performance with PAT loss INR100m for 1QFY13, vs ~INR450m
YoY.

Utilities- Turning point may be getting closer :Avendus

Reforms are likely to be undertaken in FY13f to revive the Indian
power sector. If left unchecked, annual losses of all state‐level
distributing companies are likely to reach 1.2% of the GDP. Likely tariff
hikes by DISCOMs need to be supplemented by measures that would
ensure a steady coal supply to the new thermal generating capacity of
c7GW at a stable and reasonable price. The benefits of such reforms
and expected firming up of merchant tariffs are likely to improve
earnings from FY14. Even with the well‐known stress, the consensus
forecasts for the power companies’ FY13 and FY14 earnings growth
exceed that of the Nifty. This is likely to preserve the premium in the
P/E over the Nifty. We initiate coverage with Buy ratings on NTPC and
ADANI, an Add rating on TPWR and a Hold rating on JSW.

JSW Energy- Upgrade to Buy.- Favorable times ahead; 79% EPS CAGR over FY12-14E ::Motilal oswal

Favorable times ahead; 79% EPS CAGR over FY12-14E
Softening coal prices, Raj West CoD key triggers; Buy for 27% upside
 JSW Energy's (JSWEL) performance was hit due to its "converter" business model with
open exposure on coal. Correction in global coal prices has improved the situation.
 CoD of Raj West project (Sep-12) would pave way for final tariff , removing uncertainty
on under-recovery for an otherwise regulated return project. This along with group
captive will mean offtake mix in favor of regulated projects, reducing earnings volatility.
 Expect FY12-14 EPS CAGR of 79%. Reasonable valuation (FY14E P/E of 8x, P/BV of 1.2x)
and lowest DER among peers (1.5x) provide further comfort. Upgrade to Buy.

QUERY CORNER - Bajaj Holdings, Archies, Sonata , Dhoot Industrial, NHPC, Karuturi , JSW Energy, Sundaram Brake :: Business Line

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I bought Sundaram Brake Linings at Rs 255 and Bajaj Holdings at Rs 820. Can I average them now? Let me know the medium- and long-term view on these stocks. Can I ever exit these stocks with profit?

Vedavyas L. Pai

Sundaram Brake Linings (Rs 169.5): Sundaram Brake Linings is one of the stocks that has not given up too much ground in 2011. It spent the whole of last year vacillating between Rs 140 and Rs 200.

The zone between Rs 140 and Rs 170 is quite significant from a long-term perspective. As long as the stock trades above this range, there remains the chance of move higher to Rs 200, Rs 230 or Rs 285 in the months ahead.

You can consider averaging at current level with stop at Rs 130. That said, it will be best to divest your holding on a decline below Rs 125, since next target is Rs 88.

Long-term trend will turn positive only once the stock moves above Rs 280. Else the stock can remain shackled within Rs 100-300 range. Long-term target on a break-out are Rs 340 and Rs 395.

Reduce JSW Energy:: Nomura research,

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JSWE posted an Rs317mn 2QFY12 net loss (vs. our/consensus forecast PAT of Rs202mn/Rs657mn); the earnings miss was driven by lower merchant realizations and unexpected sale on conversion/banking basis resulting in an EBTIDA of Rs1.1bn (56% below our forecast). Analyst meet takeaways: 1) Mgmt upbeat on 2HFY12 profitability on the back of capacity tie-ups, higher utilization and 15-20% expected drop in fuel cost, 2) RWPL operational, but ad-hoc tariffs cover only cash fixed costs, 3) SACMH is still not profitable. Our earnings forecasts and TP are under review; and we maintain our Reduce rating

JSW Energy: Wager gone awry :: Kotak Sec

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JSW Energy (JSW)
Utilities
Wager gone awry. JSW Energy’s reported loss for 2QFY12 reflects our long-standing
concerns on dependence on market prices for purchase of coal and merchant rates for
sale of power. JSW Energy’s fuel cost rose 26% yoy (Rs3/kwh), while its realizations
came off 14% yoy (Rs3.7/kwh). Further, shutdown of the Barmer facility due to highcost
of generation (and approval of tariffs) further aggravated the reported income.
We continue to remain skeptical on the extant model which is leveraged to spot prices;
maintain REDUCE with a revised target price of Rs53/share (Rs60 previously).

JSW Energy Reported Loss; Maintain Reduce REDUCE ::Emkay

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JSW Energy

Reported Loss; Maintain Reduce

REDUCE

CMP: Rs50                                        Target Price: Rs46

---

n     2Q12 loss after tax of Rs1.1bn is attributed to forex loss of Rs778mn (buyers credit on imported coal) and poor operational performance – due to Barmer and Vijayanagar.

n     Barmer plant did not operate in 2Q leading to huge under-recoveries (Rs590mn) & lower PLF (72%/74%) at Vijayanagar Ratnagiri (due to lower demand) added to the problems.

n     Avg realizations stood at Rs4.2/unit, significantly lower qoq and yoy at Rs4.7 and Rs4.6/unit. Fuel cost further increased to Rs3.3/unit from Rs2.9/unit qoq and Rs2.8/unit yoy

n     Huge cut in FY12E/FY13E earnings by 60%/26% on no profit from Barmer, higher fuel cost and lower PLF/merchant tariffs. Maintain Reduce; risky business model - open from both sides (fuel and off-take). Cut target price to Rs46/share

Sell JSW Energy Limited (JSWE.BO) Research Tactical Idea ::Morgan Stanley Research,

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JSW Energy Limited (JSWE.BO)
Research Tactical Idea
We believe the share price will fall relative to the country index over the next 45 days.
The company will report its F2Q12 results in the second week of November, and we expect earnings to be weak at
Rs83mn and significantly lower than the Street estimate of Rs730mn. The Ratnagiri and Vijaynagar plants recorded low
PLF during the quarter, and the Barmer units remain shut. In addition, the 10% weakness in the rupee against the US
dollar in the month of September could further affect coal costs (due to exposure to imported spot coal).
We estimate that there is about a 60% to 70% or "likely" probability for the scenario.
Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the
scenario.
Stock Rating: Underweight
Industry View: Cautious

JSW Energy – No respite in sight ::RBS

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JSW Energy's price performance should remain constricted given its significant exposure to spot
imported coal and merchant prices. The impasse on lignite transfer prices for the Barmer costplus
project casts doubt on the project's profitability. Project earnings and value continue to be at
risk. Hold on valuation.


Growth plans being reconsidered?
JSW plans to expand its generating capacity to 11GW by FY17, from roughly 2.3GW currently.
However, domestic coal shortages, high imported coal prices and environmental clearance may
force the company to scale down these plans, with Ratnagiri-II already deferred due to high
imported coal prices and slow progress on other growth projects. Most private developers in India
are reworking their growth plans in response to these issues.
Large spot imported coal exposure is the biggest concern
JSW’s biggest overhang remains the lack of clarity on fuel supply for projects due to be
operational by FY13 (about 3.2GW). Based on the current fuel supply agreement with Indonesia
and South Africa, JSW would have to import spot coal of about 3m tpa in FY12F and 4m tpa in
FY13F (roughly 60% of its total requirement). Our model factors in a slightly lower imported coal
price in FY13F, given the steps taken by the company to minimise spot coal purchases. In the
current environment, any benefit of a large coal mine acquisition could largely be neutralised by
valuation constraints and/or equity dilution.
Rajwest project impacted by issues pertaining to lignite transfer pricing
JSW’s Rajwest power plant (Units I & II) has been closed since May 2011, pending finalisation of
a tariff order. Rajasthan Electricity Regulatory Commission (RERC) in a recent judgment, asked
JSW to reappoint Mining Development Operator (MDO) for the associated lignite mining, and no
interim tariff was determined for want of fuel cost. The plant has suffered significant time and cost
overruns, and RERC’s recent order casts doubt over project profitability.
Key risks to our thesis are higher merchant prices and lower fuel prices
The obvious risks to our call are higher merchant and lower spot imported coal prices (see Table
3). We initiate coverage with a Hold rating and Rs49 target price.

JSW Energy - Unable to weather fuel pangs; reinstating with Hold ::Deutsche bank,

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JSW Energy
Reuters: JSWE.BO Bloomberg: JSW IN Exchange: BSE Ticker: JSWE
Unable to weather fuel pangs; reinstating with Hold


Regulatory hurdles, high fuel cost limits RoE; Hold on balanced risk/reward
This note marks the transfer of coverage from Manish Saxena to Abhishek Puri.
We reinstate our rating on JSW Energy at Hold and our target price at INR50. The
recent upsurge in merchant tariffs (~70% of capacity) could be partially offset by a
regulatory order, resulting in significant under-recoveries for ~12% of capacity and
high cost-curves from spot fuel purchases. Unlike a utility business, earnings
volatility on the back of commodity prices is likely to keep ROE below 12%; but
with 48% underperformance, stock valuations may get support from rising tariffs


Long-term fuel sourcing is the single biggest challenge
While it was good to be an early entrant in merchant markets, the company’s fuel
contracts could not come to pass, as the company’s partner lost out on the rights
to mine in a court case in Indonesia, resulting in sharp earnings volatility. While it
remains in a sweet spot for its southern assets (860MW) on the back of
constraints in grid-connectivity with the rest of India, it remains to be seen how
State Electricity Boards (SEBs) position themselves in an environment of rising fuel
costs and numerous other thermal producers finding constraints on generation.
Regulatory and environmental hurdles have pushed back capacity addition
JSW Energy’s new capacity addition plans of 2.2GW are about 1-3 years behind its
initial plans. Our assumptions factor in remaining capacities to come on-stream
largely in FY14 – implying revenue growth of 21% over the forecast period. Based
on the Deutsche Bank coal forecast of USD120-115/t, we estimate that the
company’s EPS will decline by a 13% CAGR.
Valuations largely pricing in visible concerns, PPA risks to forefront
We value JSW at INR50 on a SoTP basis for its power projects, using 12.5-14.5%
cost of equity, in line with peers, despite the high sensitivity of its earnings to
commodity prices. Although current valuations at 1.2-1.3x BV are pricing in visible
concerns on coal/tariffs, PPA risks in Rajasthan (first-year tariff cap) could impact
valuations further (INR-4/sh impact) if imposed and ROEs are likely to remain
below 12% over the forecast period. Any upside risks may come from waiting for
better fuel or merchant pricing, and/or higher final tariff approvals by regulators

JSW Energy: Wager falls through::Kotak Sec,

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JSW Energy (JSW)
Utilities
Wager falls through. With both imported coal and merchant tariffs headed in an
unfavorable direction, JSW Energy’s profitability has taken a hit and we do not foresee
significant improvement in the operating environment given the overall macro scenario
of coal availibility and the financial health of State Electricity Boards. We maintain our
cautious stance though and upgrade the stock to REDUCE (from SELL previously) noting
sharp under-performance. We have revised our target price to Rs60 (from Rs70
previously).


Leverage to spot markets disconcerting, merchant model under pressure
We maintain our cautious stance on JSW Energy despite the sharp correction of 22% in stock
price over the past three months. Our investment thesis is driven by JSW Energy’s excessive
leverage to spot markets with an estimated dependence of ~4.3 mtpa on spot purchase of coal
(see Exhibit 2) coupled with 60% of power likely to be sold in the short-term market.
With State Electricity Boards (SEBs) already showing a lack of appetite for purchase of expensive
power, utilization rates for imported coal-based plants have come under pressure, as was evident
in 1QFY12 with Vijaynagar units clocking a PLF of 80% (against historical PLFs in excess of 90%).
Further, continued pressure on merchant prices and a corresponding surge in prices of imported
coal have driven down the profitability of merchant capacities based on imported coal. We note
that average bilateral prices came down to Rs4.35/kwh (-25% yoy) in 1QFY12 from Rs5.83/kwh in
1QFY11. The vulnerability of earnings to the spot market was reflected in 1QFY12 numbers with
net income declining by 54% yoy despite a near doubling of operational capacity during the
period.
First phase of capacity addition nearing completion; limited visibility beyond
We note that beyond the current portfolio of projects under construction aggregating to 3,140
MW (of which 2,030 MW has already been either commissioned or synchronized), there is limited
visibility on the development portfolio of 9.5 GW. We further highlight that JSW Energy has
deployed just 1% (as of March 2011) of total project cost of Rs404 bn for its development
portfolio (see Exhibit 5), signaling limited visibility beyond FY2012E.
Upgrade to REDUCE noting recent underperformance
We upgrade JSW Energy to REDUCE (from SELL previously) noting a sharp correction in stock price
though we highlight the susceptibility of earnings to (1) rising prices of coal and (2) moderating
short-term tariffs. We have revised our target price to Rs60/share (previously Rs70/share) as we
factor a higher risk of merchant dependence, lower utilization rates and current prices of imported
coal. We have revised our EPS estimate to Rs4.8/share in FY2012E (previously Rs6.1/share) and to
Rs4.7/share in FY2013E (previously Rs5.1/share) as we adjust for higher auxiliary consumption for
Vijayanagar and Ratnagiri units.