Equity Analysis

• Expansion in OPM to the tune of 60 bps to 33.5% is largely due to lower fuel cost. The cost of fuel was lower by 220 bps to 56.6%. The cost of electricity purchased was down by 20 bps to 0.2%. The staff cost was flat at 2.6%. However OE was up by 180 bps (to 7.1%).
• Lower fuel cost is largely due to moderation in imported coal price. Moreover the increase in share of hydro and renewable in total power mix in Q2FY20 compared to corresponding previous quarter also helped lower coal consumption. The share of hydro was 32% in Q2FY20 compared to 24% in corresponding previous period. Net generation was down by 4% to 5867 MUs.
• Shorterm sales during the quarter were lower at 722 million units as compared to 1147 million units in Q1FY19 primarily due to lower short term sales at both Vijaynagar & Ratnagiri.

Management comment on Outlook

Power demand over the next 3 to 5 year is expected to improve backed by rapid urbanization and various schemes undertaken by the government such as 'Power for All', 24X7 Power and SHAKTI. The country almost achieved universal household electrification in FY2019 which should unlock the latent power demand from rural India. On the supply side, capacity addition is shedding momentum and with the retirement of old and inefficient thermal plants demand supply environment should become more balanced over the medium term. This bodes well for existing thermal plants wherein we should see the PLFs inching up. The sector is also likely to see increased consolidation with several stressed power assets available at attractive valuations. RBI's new prudential framework is a positive development, aimed at expeditious resolution process. However, volatility in imported coal prices and merchant prices, and domestic coal availability especially for private sector power plants continue to remain key concerns for the sector.

JSW Energy: Consolidated Financial Results

Powered by Capital Market - Live News