Shares of JSW Energy climbed 6 per cent in Monday’s trade after the company reported a 37 per cent rise in consolidated net profit at Rs 466 crore in the September quarter on a 16 per cent YoY rise in total revenue at Rs 2,596 crore. Brokerage Elara Securities said JSW Energy enjoys strong operating cashflow and comfortable net debt-equity ratio , but has maintained its ‘Sell’ call on the stock, given expensive valuations and a lack of growth triggers.
Kotak Institutional Equities, on the other hand, said the stock price already factors in the positives of the aggressive green foray.
On Monday, the scrip climbed 6.49 per cent to hit a high of Rs 338.50 on BSE. Elara Securities has a target price at Rs 178 on the stock, which suggests a potential 47 per cent downside on the counter. Kotak’s target suggests a potential 63.95 per cent downside.
At the present, JSW Energy is trading at 35 times FY24 EPS and 2.6 times FY24 price to book value. Elara’s target is based on FY24 EV/Ebitda of 9 times. Kotak values the stock at Rs 122.
“JSW Energy’s earnings for the quarter were impacted by sequentially weaker merchant sales as well as the shutdown of part-capacity at Ratnagiri during the quarter, offset by the contribution from the recently commissioned solar capacity at Vijaynagar and the expanded capacity base of Karcham Wangtoo,” Kotak said.
Kotak commended JSW Energy for setting aggressive growth targets based on renewable energy as well as exploring new business opportunities for green hydrogen.
It noted that JSW Energy management has demonstrated its ability to pursue return-accretive growth, while having evaluated several inorganic opportunities.
“Our FV estimate gives credit for 2.5 GW of renewable capacity, including 240 MW of hydro capacity currently under construction as well as an option value for another 13 GW. We maintain ‘Sell’ rating as the current price factors in all the benefits of targeted capacity additions and consequential improvement in earnings all the way up to FY2030E,” it said.
