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JSW Energy Ltd experienced a significant downturn on Thursday, with its share price plummeting by 10% following the release of its underwhelming Q3 earnings report. This sharp decline reflects the market's reaction to the company's performance, which fell short of analysts' projections across key metrics. Axis Securities, a prominent brokerage firm, detailed the shortfall, highlighting that JSW Energy missed its revenue, EBITDA (earnings before interest, taxes, depreciation, and amortization), and PAT (profit after tax) estimates. The brokerage firm provided specific figures demonstrating the extent of the underperformance. Consolidated net sales reached Rs 2,439 crore, representing a 4% year-on-year and 25% quarter-on-quarter decline, missing estimates by 8%. This shortfall was attributed to lower short-term realization at the Ratnagiri and Vijayanagar plants, alongside reduced tariffs at hydro plants due to a revised depreciation policy mandated by CERC (Central Electricity Regulatory Commission) tariff regulations. The impact on the bottom line was substantial. EBITDA stood at Rs 914 crore, indicating an 18% year-on-year and 46% quarter-on-quarter drop, missing estimates by 23%. The decline in EBITDA margins to 37.5% – a 622 basis points year-on-year and 1457 basis points quarter-on-quarter reduction – further emphasized the severity of the underperformance. This was primarily caused by compressed short-term spreads.
The disappointing financial results also impacted the company's PAT, which registered a substantial decrease of 32% year-on-year and 82% quarter-on-quarter, reaching Rs 157 crore. This figure fell significantly short of expectations by 47%, underscoring the overall weakness in the company's Q3 performance. Despite this considerable negative impact on the share price, a contrasting view was offered by Jefferies, a prominent global brokerage firm. While acknowledging the significant shortfall in EBITDA, which was far below their projections, Jefferies adopted a contrarian stance, advising investors to 'Buy the weakness'. This recommendation suggests that the brokerage firm believes that the current market reaction to the Q3 results is an overreaction and that the stock is undervalued at its current price. However, Jefferies tempered its bullish sentiment by adjusting its share price target downward by 21%, reflecting a more cautious outlook than its initial assessment. The reduced target price indicates that while Jefferies maintains a positive outlook on JSW Energy, it acknowledges the risks and uncertainties associated with the company's recent performance.
The market's response to the Q3 earnings was immediate and decisive. JSW Energy's share price experienced a sharp decline of 10%, closing at Rs 453.60 on Wednesday, down from Rs 504 on the previous day. This drop translated to a significant reduction in the company's market capitalization, which slipped to Rs 82,206 crore. Trading volume was notably high, with 5.78 lakh shares changing hands, generating a turnover of Rs 27.14 crore on the BSE. The Q3 results revealed a decline in net profit of 32% year-on-year, dropping to Rs 157 crore from Rs 232 crore in the same period of the previous year. While revenue displayed a relatively modest 1% year-on-year decrease, falling from Rs 2,661 crore to Rs 2,640 crore, the underperformance in other key metrics overshadowed this marginal revenue decline. In other developments, JSW Energy's board approved the raising of long-term funds up to Rs 3,000 crore through a private placement of rated and listed Non-Convertible Debentures. The company also announced the reappointment of Rajiv Sharma as an independent director for a second five-year term, starting on March 24, 2025. These announcements were made after market hours on Tuesday, preceding the subsequent share price drop on Wednesday. The contrasting views of Axis Securities and Jefferies highlight the complexities of assessing a company’s prospects based on a single quarterly earnings report. While Axis Securities expressed concern and lowered its price target, Jefferies saw an opportunity for investors, reflecting varying interpretations of the company's future performance and the market's reaction.
Source: 'Buy the weakness' in JSW Energy, says Jefferies; stock falls 10%