JSW Energy Sees Profit Booking On Weak Outlook For Merchant Power

JSW Energy announced its March 2013 quarter results. The numbers were lower than the street’s estimates, and thus the counter witnessed a steep fall after the results were announced.

If we take a look at the figures, the consolidated topline for the March 2013 quarter stood at Rs 2300.99 crore as against Rs 2365.24 crore in December 2012 and Rs 2081 crore in March 2012. Though there was marginal growth in the topline on a YoY basis, the company has managed to put in better performance in the bottomline on account of good savings on fuel cost. For March 2013, the PAT stood at Rs 347.40 crore as against Rs 312 crore in December 2012 and Rs 230.32 crore in March 2012.

On the fuel cost savings, the management has stated, “During the quarter, the landed import coal continued to remain fairly stable with relatively less volatility on the back of major coal indices including API 4 index remaining range-bound and the rupee also moderating by a small measure against the US dollar”. The company managed a realisation of Rs 4.91 per unit as against Rs 4.51 per unit in March 2012.

On the operational front, JSW Energy produced 4686 million units through its three plants (against 4618 million units in March 2012). It achieved an average 85.48 per cent plant load factor (PLF) for the March 2013 quarter. The Vijayanagar (Karnataka) plant sustained a high PLF of 101 per cent.

During the quarter, with the commencement of commercial operations of 540 MW capacity in Barmer, the company has increased its capacity to 3140 MW. Apart from that, all the requisite environmental approvals for the project have been received for its 240 MW hydroelectric project at Kuther (Himachal Pradesh).

On a yearly basis, the company posted a topline of Rs 8934.30 crore for FY13 against Rs 6118.82 crore in FY12. The bottomline posted strong growth, with its net profit at Rs 912.40 crore for FY13 (Rs 170.63 crore in FY12).

As regards the outlook, the management has commented, “We expect merchant power prices to remain under pressure with additional generation capacities and slowdown in demand growth, while the congestion on the transmission corridor has kept prices relatively higher in the southern region as compared to the other regions”.

With JSW Energy selling more than 50% produce through the merchant route, we feel that this scrip may remain under pressure for some time. We had recommended JSW Energy to investors in Dalal Street Investment Magazine (Volume 28, Issue # 10, dated May 5, 2013) under our Low Priced Scrip column. We recommend that investors book profit at the current levels.