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EARNINGS REVIEW
JSW Energy (JSWE.BO)
Neutral Equity Research
Below expectations on higher fuel costs and uncertainty on Rajwest
What surprised us
JSW Energy (JSWE) reported 1QFY12 PAT of Rs1.36 bn vs GSe of
Rs2.45bn and Bloomberg consensus of Rs1.86bn, primarily due to 1)
higher fuel costs, with an 11% qoq increase to Rs2.92/kwh on higher
imported coal prices; 2) no ROE recognition as regulatora have yet to
approve tariff for Rajwest plant. The delay on tariff approval was due to
some procedural delays at fixation of transfer price of lignite from its
Jalipa mines; and 3) lower generation (average PLF of 72% vs. 86% qoq)
due to maintenance shutdowns and backing down of generation due to
better-than-expected rainfall. Average realization was higher qoq at Rs5.25
per unit vs. Rs4.76 in 4QFY11.
JSWE expects to synchronize 300MW of Ratnagiri Unit 4 in 2QFY12, increasing
merchant exposure to about 60%, and we expect short-term rates to decline to
Rs3.5 by Sept 2011 and continue to be subdued into 3QFY12E. We estimate
JSW’s earnings could decline 2.6% for every 1% decline in short-term rates. We
also continue to await visibility on coal from the group’s long-term coal supply
contracts, which would be a key catalyst for stock performance.
What to do with the stock
We reiterate our Neutral rating on JSW Energy. We cut our 12-month
SOTP-based target price to Rs71 (from Rs75) and reduce our
FY12E/13E/14E EPS 30%/1.4%/1.3% due to higher fuel costs and lower ROE
for its Rajwest power. Lower exposure to spot coal markets and demand
recovery in the summer could lead to stock re-rating. Key risks: Movement
of coal prices either upwards/downwards
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
JSW Energy (JSWE.BO)
Neutral Equity Research
Below expectations on higher fuel costs and uncertainty on Rajwest
What surprised us
JSW Energy (JSWE) reported 1QFY12 PAT of Rs1.36 bn vs GSe of
Rs2.45bn and Bloomberg consensus of Rs1.86bn, primarily due to 1)
higher fuel costs, with an 11% qoq increase to Rs2.92/kwh on higher
imported coal prices; 2) no ROE recognition as regulatora have yet to
approve tariff for Rajwest plant. The delay on tariff approval was due to
some procedural delays at fixation of transfer price of lignite from its
Jalipa mines; and 3) lower generation (average PLF of 72% vs. 86% qoq)
due to maintenance shutdowns and backing down of generation due to
better-than-expected rainfall. Average realization was higher qoq at Rs5.25
per unit vs. Rs4.76 in 4QFY11.
JSWE expects to synchronize 300MW of Ratnagiri Unit 4 in 2QFY12, increasing
merchant exposure to about 60%, and we expect short-term rates to decline to
Rs3.5 by Sept 2011 and continue to be subdued into 3QFY12E. We estimate
JSW’s earnings could decline 2.6% for every 1% decline in short-term rates. We
also continue to await visibility on coal from the group’s long-term coal supply
contracts, which would be a key catalyst for stock performance.
What to do with the stock
We reiterate our Neutral rating on JSW Energy. We cut our 12-month
SOTP-based target price to Rs71 (from Rs75) and reduce our
FY12E/13E/14E EPS 30%/1.4%/1.3% due to higher fuel costs and lower ROE
for its Rajwest power. Lower exposure to spot coal markets and demand
recovery in the summer could lead to stock re-rating. Key risks: Movement
of coal prices either upwards/downwards
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