Nomura Rates JSW Energy as ‘Reduce’
At Rs 6.6 bn (-43% y-o-y), JSW Energy’s (JSWE’s) Ebitda was marginally above our forecast, but 11% below consensus. At Rs 214 million (-93% y-o-y) the company posted a marginal profit vs. our estimate for a marginal loss and consensus forecast of a PAT of Rs 1.2 bn (i.e., an 81% miss). At Rs 19 billion (-27% y-o-y), revenues were in line with our forecast (3% below consensus) whereas imported coal cost at Rs 2.87/kWh (+14% q-o-q) was 4% below our forecast. We believe this can be attributed to the availability and utilisation of low cost coal inventory. The balance sheet is still healthy, even as JSWE undertakes debt refinancing. Net debt stood at R141 bn (vs. Rs 137 bn as of Sep 2016), net debt/ equity was 1.38x (vs. 1.34x as of Sep-2016) and cost of debt was marginally lower q-o-q at 10.26% (vs. 10.37% as of Sep-2016). Nomura in its report said, “In our view, meaningful 9MFY17 Ebitda/PAT comprises 82%/ 106% of our FY17F Ebitda/PAT for JSWE; however, we believe that profitability in Q4 remains a challenge. In the backdrop of the earnings miss, management expecting margins to remain under pressure in the short-term and the resignation of the well-regarded Director (Finance) & CFO, we believe stock price performance will remain under pressure, at least in the near-term. At the current market price, the stock trades at FY18F P/B of 1.0x (BVPS of R57.9) and P/E of 14.4x (EPS of R4.1). We maintain our Reduce rating.”
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