BackJSW Energy stock powers ahead on growth outlook
Notably, net debt of the company reduced by ₹513 crore in the March quarter and by ₹2,739 crore in FY21
PremiumThe recent uptick in power demand is expected to drive the performance of JSW Energy Ltd. This is well-reflected in the company’s shares, which have more than doubled compared to their pre-covid highs.
JSW Energy has continued to see rising contributions from long-term power purchase agreements (PPAs), ensuring longer-term growth visibility. Besides, continued deleveraging has helped improve earnings prospects further. Efforts to grow the renewables portfolio have driven investor sentiment.
The firm reported decent results for the March quarter. Long-term (LT) net generation increased 3% in both Q4 and FY21. LT net thermal generation was also higher by 5% in Q4 and 8% in FY21. But lower short-term sales and merchant power realizations meant revenues fell 12.5% year-on-year.
The Ratnagiri facility saw lower short-term power demand and impacted plant load factor. Being a lean season for hydropower generation, overall power generation declined 7.6%. Though the plant load factor declined across the Ratnagiri plant and hydro plants (given poor hydrology), the same improved across its Vijaynagar and Barmer stations, said analysts at HDFC Securities Ltd.
While revenues saw some impact, profits were helped by lower operating and fuel costs. Ebitda margins improved to 40.3% in Q4FY21 from 32.1% in the year-ago quarter. Lower interest expenses due to deleveraging further supported net profit at ₹107 crore comparable to the year-ago quarter despite a decline in revenues. Notably, net debt reduced by ₹513 crore in Q4 and by ₹2,739 crore in FY21. Net debt to equity now stands at 0.43 times, while net debt to Ebitda stands at 1.97x. Though the Ratnagiri plant saw the impact on generation, the LT PPA at the plant increased by 179MW in May, further de-risking the portfolio. The Ratnagiri LT PPA tie-up is now at 96%, said the company.
“We highlight JSW Energy has increased its capacity under LT PPA to 86% (81% in March 2020), contributing to 95% to Ebitda," said analysts at Kotak Institutional Equities.
JSW is pursuing a growth strategy to expand its current capacity of 4.6GW to 10GW by FY25, and 20GW by FY30, with the entire capacity addition being in the renewable segment. The Street will evidently be watchful on the aspect of timely execution as well as PPA tie-ups.
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