JSW Energy shares surge 15% in 4 sessions; analysts see up to 51% upside

JSW Energy share: According to reports, global brokerage Morgan Stanley has maintained its 'Overweight' rating on JSW Energy stock

JSW Energy share price: JSW Energy share price was outperforming the stock market today. Extending their gains into fourth straight day, JSW Energy shares surged 6.11 per cent in the intraday trade on the BSE to hit a high of Rs 497 per share.

 

Including today's rally, JSW Energy stock has zoomed 15.13 per cent in the last four sessions on the BSE. By comparison, the BSE Sensex, today, was trading 433 points (0.57 per cent) lower at 10:25 AM, and has slipped 1 per cent in four sessions.

 

According to reports, global brokerage Morgan Stanley has maintained its ‘Overweight’ rating on JSW Energy stock today with a share price target of Rs 545. This implies a 16.4 per cent upside from the stock’s last closing price.

 

The analysts, reportedly, believe the company’s expansion of green energy business, inorganic growth in thermal energy sector, and investment in storage assets bode well for the growth outlook.

 

Recently, JSW Energy received approval from the National Company Law Tribunal (NCLT) to acquire KSK Mahanadi Power Company (KMPCL), a thermal plant in Chhattisgarh.

 

The acquisition is expected to be completed by the June quarter of the next financial year (Q1FY26), once the Competition Commission of India’s (CCI’s) approval is received.

 

KMPCL is a 3.6 gigawatts (Gw) coal-fired power plant, which includes 1.8 Gw of operational capacity and an additional 1.8 Gw in brownfield expansion potential. JSW Energy won the insolvency bid process to acquire the plant at a cost of Rs 15,990 crore.

 

Analysts at Motilal Oswal the net present value (NPV) for JSW Energy's 74 per cent stake in KMPCL to be Rs 27 per share, factoring in the brownfield expansion.

 

It estimates the return on equity (RoE) for KMPCL at 6 per cent/1 per cent in FY27/FY28, while the return on capital employed (RoCE) is estimated at 2 per cent/0.5 per cent.

 

"The decline in these metrics in FY28 is attributed to the 1.8 Gw brownfield expansion, which is leading to an increase in debt," the brokerage said.

 

Both RoE and RoCE, however, are expected to improve to 15 per cent and 8 per cent, respectively, by FY32 as revenue generation from the additional 1.8 Gw capacity commences from FY29 onwards.

 

Going forward, Motilal Oswal estimates JSW Energy’s net debt to Ebitda ratio rise to 5.6x in FY26 from 4.5x at the end of Q3FY25. It will fall to 4.1x by FY27.

 

"We value JSW Energy’s Thermal segment at 9x FY27E Ebitda and renewable energy at 15x FY27E Ebitda. Further, Hydro segment is valued at 1.5x FY27E book value and green hydrogen equity at a 2x multiple to arrive at a share price target of Rs 705 per share," MOFSL said with a 'Buy' rating on the stock. JSW Energy’s current share price target, it added, excludes the NPV of KMPCL.

 

The target price provides 50.5 per cent upside from current stock price level.

 

Apart from the acquisiton, analysts like the company’s ability to expand its market share in recent bids at competitive tariffs, coupled with its integration of business models makes it a solid player in India's energy needs.

 

Morgan Stanley analysts anticipate a 24 per cent Ebitda CAGR over FY24-28, with renewable energy Ebitda CAGR growth seen at 52 per cent during the period.

 

In the December quarter of the current financial year, JSW Energy reported a 32 per cent year-on-year (Y-o-Y) fall in net profit at Rs 157.5 crore. The company’s revenue slipped 5.6 per cent to Rs 2,400 crore, while Ebitda tumbled 21.2 per cent on year to Rs 874.8 crore.

 

The company's Ebitda margin shrank to 36.5 per cent from 43.7 per cent last year.