Brokerages bullish on JSW Energy
Most analysts are positive on JSW Energy
post the development and have raised their target prices by considerable margin. For instance, global brokerage firm CLSA has maintained "buy" call on JSW Energy
with the target price of Rs 85 - nearly 34 per cent upside against Monday's close. The brokerage added that the company is on track for profitable growth with its target to double capacity over 3-5 years.
Edelweiss Securities, too, feels that JSW Energy has put its robust balance sheet and cash flows to good use by acquiring 100 per cent stake in GMR Kamalanga. "This acquisition sets the company on track to double capacity to 9GW by FY24E," wrote Swarnim Maheshwari, equity research analyst at Edelweiss Securities in a co-authored note with Ashutosh Mehta.
Adding, "JSWE’s operational (lower O&M cost) and financial prowess (250bps interest cost savings) can easily lift existing earnings before interest tax, depreciation and amortisation (EBITDA) by 15 per cent and net profit or profit after tax (PAT) can turnaround in year one itself."
They also noted that the acquisition is value accretive by 5/7 per share in base/best case scenarios. The company, as per reports, has acquired GMR Kamalanga at a discount of 20 per cent as compared to its replacement costs. The brokerage has maintained 'BUY' rating on the stock and has set the target price of Rs 92.
For the quarter ended December 31, 2019, JSW Energy's consolidated net profit jumped over twofold to Rs 394 crore, mainly helped by reduced expenses. The company had clocked a Rs 146-crore net profit during the corresponding quarter a year ago. The firm's total expenses dropped to Rs 1,864 crore, against Rs 2,271 crore in the October-December quarter of 2018-19.
Those at Motilal Oswal Financial Services (MOFSL) see the GMR Kamalanga acquisition as value accretive for JSWE, given the strategic location of the plant, room for merchant volumes, and the company’s ability to reduce interest and operations and maintenance (O&M) costs post acquisition. "Moreover, the move lends visibility to JSWE’s capital deployment. We raise our FY21/22 earnings per share (EPS) estimates by 15/8 per cent to account for the takeover of Kamalanga from FY21. Upgrade to Buy with a TP of Rs 78/share," the brokerage added.
In the past one year, JSW Energy has underperformed the markets
and slipped 2 per cent as against over 13 per cent rise in the Nifty50 index.