JSW Energy shares tumble 7% as Street cites debt concerns, expensive valuations

Shares of JSW Energy

Ltd. declined more than 7% on Tuesday, May 12, after multiple brokerages raised concerns over the company's elevated debt levels, expensive valuations and pressure on profitability despite strong operational growth in the March quarter.

Brokerage firm JPMorgan Chase maintained its 'Underweight' rating on the stock with a target price of ₹505, stating that JSW Energy's Q4FY26 performance remained weak at the bottom-line level.

While the company reported robust growth in revenue and EBITDA, JPMorgan said that rising debt and higher fixed costs are likely to continue weighing on earnings over the medium term.

The brokerage also said the renewable energy landscape in India has become increasingly challenging, while the company's aggressive expansion pipeline would require substantial capital expenditure, resulting in elevated leverage.

According to the brokerage, the higher leverage increases the stock's equity risk profile, particularly in a slowing environment.

JPMorgan also said the stock's valuation of nearly 13x FY28 estimated EV/EBITDA remains expensive.

Meanwhile, JM Financial downgraded JSW Energy to 'Add' from 'Buy' and set a price target of ₹627.

The brokerage said it remains confident about the company achieving its target of 30 GW capacity by 2030, but flagged concerns around elevated debt following multiple acquisitions and investments into capital-intensive projects.

JM Financial added that the company appears to be recalibrating its strategy by keeping part of its thermal power capacity operational while moderating renewable energy additions.

However, recent acquisitions and expansion plans have significantly increased leverage.

The brokerage also said that after the recent rally, the stock is trading at elevated valuations of 12.5x EBITDA and 2.7x price-to-book.

Brokerage firm CLSA maintained its 'Hold' rating on the stock, citing expensive valuations and the possibility of an equity raise weighing on the balance sheet.

CLSA said that JSW Energy posted another profit-before-tax loss during Q4FY26 and said that the company is gradually reducing its exposure to the merchant power market.

The brokerage added that the core parent business reported weak quarterly earnings, with recurring profit after minority interest declining 40% year-on-year.

It also said the thin free-float nature of the stock has contributed to rich valuations, with the stock trading at 27.2x FY27 estimated core earnings.

For the March quarter, JSW Energy reported a 41% rise in revenue to ₹4,498.6 crore from ₹3,189.4 crore last year. EBITDA increased 86.8% year-on-year to ₹2,249.8 crore, while margins expanded to 50% from 37.8%.

However, sharply higher finance costs impacted profitability. Finance expenses surged to ₹1,608.5 crore from ₹675.3 crore a year ago, leading to an 8.8% decline in net profit to ₹372 crore from ₹408 crore.

Power sales volumes rose 48% year-on-year to 11.7 billion units from 7.9 billion units in the corresponding quarter last year.

The company reiterated its long-term guidance, targeting installed capacity growth at a CAGR of nearly 20% through 2030 to reach 30 GW.

It also plans to build 40 GWh of energy storage capacity by 2030 and has guided for ₹20,000 crore of capital expenditure in FY27.

JSW Energy's total net debt stood at ₹65,834 crore at the end of the March quarter.