JSW ENERGY -- channel breakout

Attached JSW energy chart shows a W shaped formation of price of stock and then a breakout from the channel. Now the stock price is taking support on the upper end of channel. Stock is likely to move up post some consolidation at these levels and target 75.

One can buy at cmp of around 61.50-62 with stop loss of close below 58 and target of 75 plus.

disc: very small trading position just to test the hypothesis.


CONFERENCE CALL - from Capital Markets

JSW Energy

Tax rate for FY16 will be 27-28%

JSW Energy held a conference call on Jan 20, 2015. In the conference call the company was represented by Sanjay Sagar, Joint Managing Director & CEO and Pramod Menon, Director Finance.
Key takeaway of the conference call

Power sold was up 11% to 5969 million units. But the share of long term power sales has come down to 51% compared to 54% in the corresponding previous quarter. The average realization was Rs 4.09/ unit in Q3FY16 compared to Rs 4.25/unit in corresponding previous quarter.

Lower off take by JSW Steel due to shutdown of its operations for expansion and maintenance work during the quarter has brought down the share of long term power to total sales in Q3FY16.

Expect the effective tax rate to be about 27-28% for FY16 as a whole even though the tax rate for the quarter ended Dec 2015 was higher at about 36%.

Benefit of refinancing and reduction in interest rate has brought down the weighted average cost of debt to 10.35% as of Dec 31, 2015 and target to bring below 10%.

Kutehr HEP project total cost is around Rs 2900 crore and the company expect to complete the Financial closure by end of current fiscal. The company has incurred a cost of Rs 254 crore as of Dec 31, 2015 in this project. Executing this project on EPC basis with the EPC contractor indentified through transparent ICB route with Jayprakash Associates emerging as the lowest bidder. Though the cost of Rs 2900 crore for 240 MW works out to Rs 12 crore per MW that should not be compared to the valuations for cost paid for acquisition of older plants. There won’t be any problem in selling the power in long term basis. Right now there is no PPA signed for this project and there is no worry for selling this power in long-term basis.

Karcham Wangtoo - Free power is 12% and will increase by another 6% over next 7 year. Currently PPA is for 70%. And balance is for merchant sales. The increases in free power ill bring down the merchant sales.

Hydro assets acquired becoming part of JSW Energy effective September 1, 2015 has resulted in higher interest and depreciation that hurt the bottom-line.

JSW Toshiba is evaluating the insurance related claims. About Rs 18-20 crore is the entity level loss is estimated for JSW Toshiba. The company’s share will be around Rs 5 crore.

Stabilisation of Kolhapur is taking more than long time for stabilization this additional transmission capacity of 2000 MW to South India from rest of the grid will come in by end of CY2016.

Cash on balance sheet is Rs 386 crore as on Dec 2015.

Acquisition Debt sitting at SPV level is Rs 5700 crore and at JSW Energy level is Rs 1500 crore. The acquisition debt sitting in JSW Energy level will move to SPV level in couple of quarters.

Sales in day ahead market in southern market by the company is very insignificant and largely in shorter of 6 months kind of contract.

Tariff on Himachal HEP – Invoicing and recognition is done on petitioned rate. The difference between invoicing and payment is about Rs 67 crore. The payment will be as per the tariff order of CERC.

Vijaynagar and Ratnagiri plants were on South African coal in Q3FY16.

Hi All,

JSW Energy looks pretty good on the Charts and on Screener too. It has quite cheap, ( Compared to Graham Number), Profits are Increasing, No Pledged Shares by the promoter, Robust Growth over the last 3 and 5 Years.

The only negative is the Interest Cost and Debt Percentage - which to be fair is high for almost all Utilities / Energy Generators.

Promoter - Jindal Group to be fair are not the best of the promoter. They definitely have had share of Coal Scams and Zee Controversy. Also an Politician is always corrupt. No matter what…

Any Views from the community?

Manish

CONFERENCE CALL - from Capital Markets

Power tariff to sustain drop in FY17 as well

JSW Energy held an analyst meet on April 28, 2016 at Mumbai. In the meet the company was represented by Sanjay Sagar, JMD & CEO and Pramod Menon, Director Finance.

Key takeaways of the call

  • Currently power supply is outstripping the demand. The sector is continue to be strained by lack of demand for long term power procurement, lack of clarity around auction of coal blocks, power network congestion and high T&D losses even though the domestic coal availability has been improving and international coal prices have been range bound.

  • Marginal drop in tariff in 2015-16 the company expects that declining trend to continue and expect 15-20 paisa drop in tariff for current fiscal as well.

  • Power sales in Q4FY16 and FY16 were up by 24% and 5% respectively. Merchant sales during the quarter were 2770 million units and the sales under long term PPA were 3075 million units.

  • Expect sector stress is to continue for another 12-24 months and this throws up lot of inorganic opportunities. But the acquisitions have to be synergetic to existing business models of the company. Renewable is not a no go segment for the company, if the valuations are right the company is open to acquire renewable assets.

  • On long-term basis the company is comfortable at 2.5 times of debt equity ratio.

  • RERC issued an order for the Barmer Power Plant determining the final tariff for FY09-FY14 along with annual performance review and true up for FY2009-10 and FY2010-11. The company has filed an appeal against the said order before the Appellate Tribunal of Electricity towards disallowance of capital cost and other matters. However during the quarter, the company has taken a net impact of Rs 23 crore after suitably incorporating the impact of this order for the relevant period. Significant portion of this RS 23 crore impact is partly captured in fuel cost and some portion is in top line.

  • Vijaynagar power plant still has 80IA benefits.

  • Karcham Wangtoo - If Punjab wants to relinquish Haryana and UP is ready to buy that quantum of power.

@hitesh2710 Sir, just a quick questions, under UDAY scheme all DISCOMS have to improve their AT& C losses and bring it to a pre agreed level.

For eg. see this MOU: https://www.uday.gov.in/MOU/Tamil-Nadu-MoU.pdf

Will an improvement in the AT&C at the discom level translate to a better realisation (as more power gets wheeled for same capex) at the producer level?

Thanks

There is a structural shift in demand/supply scenario. Demand is constantly increasing over the past 4 quarters and thermal supply has been dwindling with old plants shutting down which is causing the rate of demand to rise faster than that of supply. Hence, merchant rates are going up and JSW Energy is a big beneficiary of that, as confirmed by this article as well. This happens specifically because imported coal is now a viable source of power till domestic coal can be procured. PLF should go up significantly.

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What would be the impact if this succeeds.

The catalyst for future growth for the JSW Energy Limited …
Coal prices in the international market has fallen significantly (by ~30% YoY basis) and this is likely to improve the operating margins significantly going forward from Vijaynagar and Ratnagiri plants which is mostly fed by the imported Coal .
Strong balance sheet with D/E ratio of 0.89x and good amount of Reserves of RS 10,115 Crores by sep2019 as per screener It can eye for inorganic growth by acquiring distress thermal plants .
Contribution of LT Power Purchase Agreement (PPA) increased to 80.5% from 75% in FY19 and due to strong infrastructure it can have robust supply and expected to grow further .
It has well diverse set of energy producing assets viz thermal, hydro and solar segments .
it is geographically well diverse and has stakes in natural resource companies in South Africa
It has one of the has one of the strongest balance sheet in the power sector
disc : not invested this is not any stock recommendation to buy or sell

on a differrent note… this is how Sajjan Jindal , manages his mind/ work life balance, derives power from
traits of a good entrerpreneur and a leader, balancing all aspects of life

The thread is dormant, and the stock has run up 3x. Any ideas why it is shooting up despite poor fundamentals. Holding a decent position since 80 levels and wondering whether to exit.

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I have exited around 200 after I feel it’s too expensive. Maybe some inside new take this stock up.

Seems to be a Hydrogen story unfurling here. The company is getting into JVs with foreign investors for new fuels.