Motilal Oswal Financial Services downgraded JSW Energy to ‘Neutral’. It also slashed the target price to Rs 550, which implies a downside of 2% from the current market price.
This decision was driven by two main factors. First, a 17% rally in the stock price over the last four months, which reduced valuation comfort.
Second, a 9% cut to the FY28 EBITDA estimate due to an expected slower pace in renewable commissioning (4GW) for that year.
After the four-month run, the company is trading at an EV to EBITDA of 12x for FY28.
Also, the company’s stake in JSW Steel is valued at a 25% discount to the current market price, acknowledging the strategic significance of this holding while incorporating a conservative valuation approach.
However, Motilal Oswal said that it continues to view JSW Energy positively due to its robust earnings growth trajectory, strong capacity expansion plan (from 14.5GW currently to 30GW by 2030), and superior execution capabilities compared to peers.
Strong Q1 FY27 earnings
Despite revenue being in line with expectations at Rs 5,210 crore, the company’s EBITDA and Adjusted net profit significantly exceeded estimates. EBITDA of Rs 2,870 crore was 13% above estimates, while adjusted net profit of Rs 470 crore beat expectations by 89%.
Progress in renewable capacity
Renewable capacity additions remain on track, with 1.1 GW commissioned in FY27 year-to-date. This supports the management’s guidance of adding a total of 3 GW in renewable capacity during FY27.
Strengthened balance sheet
The company successfully executed fund-raising initiatives totalling Rs 10,150 crore through a preferential allotment (Rs 3,000 crore), a partial stake sale (Rs 3,150 crore), and a Qualified Institutional Placement (Rs 4,000 crore). These efforts have helped bring leverage under control and strengthened the overall balance sheet.
Resilient operational performance amid challenges
Operational performance remained resilient despite lower Plant Load Factors (PLFs) in hydro (40%) and thermal (71%) segments. These lower figures were attributed to weaker hydrology, a planned outage at the Ratnagiri plant, and a 17-day transmission evacuation outage at KSK Mahanadi caused by extreme weather.
JSW Energy share price performance
The share price of JSW Energy has risen 2.7% in the last five trading sessions. The stock has dropped 2.2% in the last one month. However, the stock has given a return of 17% in the past six months. JSW Energy’s share price has declined 4.4% over the last one year.