JSW Energy - Ideally Placed to Encash on Growth; Result Update Q3FY15 ::Edelweiss

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JSW Energy’s (JSW) ~INR3.9bn Q3FY15 PAT surpassed our ~INR3.3bn estimate due to higher merchant realisations and operating efficiencies in coal consumption and maintenance costs. Management is confident of even better merchant prices right through FY17 and sustaining efficiency gains. JSW board has also approved INR50bn fund raising to encash on growth opportunities. Equipped with a robust balance sheet and cash flows, we believe the company is ideally positioned to gain from the consolidation in the power sector, benefits of which we believe are not fully factored in at current levels.

Record profits on highest ever quarterly generation

Net sales at 5.37BUs (up 33% YoY), the highest ever generation in a quarter, were led by improvement in demand across Maharashtra and Rajasthan. This was reflected in improved PLFs for Ratnagiri (84% versus 68% YoY) and Barmer (73% versus 32%) plants. Vijaynagar plant continued its steady performance on sustained demand in Southern states at remunerative merchant prices >INR5/unit. Coal cost continued its declining trend (down 4% QoQ) aided by improved station heat rate and auxiliary consumption. These, coupled with other efficiencies, helped reduce O&M costs (down to INR1.1bn from INR1.26bn in Q2FY15), aiding 75% YoY PAT surge.

JPVL deal closure by Q1FY16; more acquisitions on the anvil

The process for acquisition of Jaiprakash Power’s (JPVL) hydro assets (1,391MW) for ~INR97bn (INR3bn advance paid) is on track and expected to be closed by Q1FY16. Management continues to explore more opportunities to acquire stranded assets and has also received board approval for raising a INR50bn war chest.

LINK
https://www.edelweiss.in/research/JSW-Energy--Ideally-Placed-to-Encash-on-Growth;-Result-Update-Q3FY15/28210.html