Despite a weaker-than-anticipated performance in the June quarter (Q1 FY27), Elara Capital has maintained its 'Buy' rating on state-run power generator SJVN Ltd. The brokerage firm set a target price of Rs 106, indicating a potential upside of over 50% from current trading levels, with SJVN shares last trading at Rs 69.68.
For Q1 FY27, SJVN reported a 52% year-on-year (YoY) revenue increase to Rs 1,390 crore, though this represented a 7% sequential decline. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) saw a 19% YoY rise. Elara Capital largely attributed the earnings shortfall to significantly weaker hydro generation, which declined 41% YoY. Specifically, output from the Nathpa Jhakri and Rampur hydro projects decreased by 40% and 41% respectively.
Thermal Business Shows Improvement
Despite the hydro setbacks, Elara highlighted an encouraging improvement in SJVN's thermal operations. Generation from the Buxar thermal power plant notably increased by 15% quarter-on-quarter, contributing to reduced losses across the company's thermal and renewable energy segments. On the capacity front, SJVN currently boasts an installed capacity of 4.2 GW, with an additional 3.9 GW actively under construction.
Capacity Expansion and Future Targets
While the company is pushing forward with its project pipeline, its ambitious target of 25 GW by FY30 is reportedly under review. This re-evaluation is cited due to slower renewable energy tendering processes and various execution hurdles.
JM Financial Takes Contrasting View
In contrast to Elara's optimistic outlook, JM Financial expressed a more cautious view, maintaining a 'Reduce' rating on SJVN stock with an unchanged target price of Rs 67. JM Financial's analysis indicated that SJVN's Q1 revenue, estimated at approximately Rs 1,400 crore (a 52% YoY increase), fell short of their expectations, despite increased generation from the Buxar thermal plant's first unit. However, they noted that the adjusted profit after tax (PAT) of around Rs 260 crore, up 14% YoY, surpassed their estimates, primarily due to lower finance costs.