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What is the story about?
Shares of JSW Energy Ltd. were trading up to 10% lower on Tuesday, January 27, after brokerage firm Jefferies cut its price target on the stock.
While the brokerage maintained its 'Buy' rating, it reduced the target price to ₹660 from ₹700 earlier.
The brokerage said that December quarter EBITDA rose 2.2x YoY but came in 19% below estimates due to lower renewable generation.
It said the company remains on track to meet its FY26E capacity addition estimate of 3.1 GW, having already added 2.5 GW in the first nine months of the year.
Management indicated confidence in adding an additional 0.6 to 1.1 GW over and above estimates.
However, Jefferies lowered its FY26E-FY28E EBITDA estimates by 2-4%, while EPS cuts were steeper due to balance sheet leverage and a higher effective tax rate.
Despite the revisions, Jefferies believes JSW Energy can deliver a 41% EBITDA CAGR over FY25-FY28E, led by improved execution.
JSW Energy Q3 review
JSW Energy reported a 67.4% YoY rise in revenue to ₹4,081 crore from ₹2,438 crore. EBITDA stood at ₹2,033 crore versus ₹918.8 crore a year ago, marking a 2.2x jump, with margins expanding to 49.8% from 37.7%.
Net profit came in at ₹420 crore compared with ₹168 crore last year. However, the bottom line was aided entirely by a deferred tax writeback of ₹750.8 crore, and would have otherwise slipped into a loss.
Net power generation increased 65% YoY during the quarter. EBITDA contribution remained strong from the acquired Mahanadi thermal plant and the O2 power portfolio.
Key concerns
Higher funding costs arising from leveraged acquisitions as a key risk. Additionally, elevated valuations despite recent underperformance, with the stock trading at 24x FY26 P/E and 2.7x FY26 P/B.
While the brokerage maintained its 'Buy' rating, it reduced the target price to ₹660 from ₹700 earlier.
The brokerage said that December quarter EBITDA rose 2.2x YoY but came in 19% below estimates due to lower renewable generation.
It said the company remains on track to meet its FY26E capacity addition estimate of 3.1 GW, having already added 2.5 GW in the first nine months of the year.
Management indicated confidence in adding an additional 0.6 to 1.1 GW over and above estimates.
However, Jefferies lowered its FY26E-FY28E EBITDA estimates by 2-4%, while EPS cuts were steeper due to balance sheet leverage and a higher effective tax rate.
Despite the revisions, Jefferies believes JSW Energy can deliver a 41% EBITDA CAGR over FY25-FY28E, led by improved execution.
JSW Energy Q3 review
JSW Energy reported a 67.4% YoY rise in revenue to ₹4,081 crore from ₹2,438 crore. EBITDA stood at ₹2,033 crore versus ₹918.8 crore a year ago, marking a 2.2x jump, with margins expanding to 49.8% from 37.7%.
Net profit came in at ₹420 crore compared with ₹168 crore last year. However, the bottom line was aided entirely by a deferred tax writeback of ₹750.8 crore, and would have otherwise slipped into a loss.
Net power generation increased 65% YoY during the quarter. EBITDA contribution remained strong from the acquired Mahanadi thermal plant and the O2 power portfolio.
Key concerns
Higher funding costs arising from leveraged acquisitions as a key risk. Additionally, elevated valuations despite recent underperformance, with the stock trading at 24x FY26 P/E and 2.7x FY26 P/B.
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