Analyst Corner: JSW Energy Rating ‘Buy’; Kamalanga deal to be value-accretive
FY21/22e EPS up 15/8% to factor in gains from acquisition of GMR plant in Odisha; upgraded to ‘Buy’ with TP of Rs 78
JSW Energy (JSWE) has signed a share purchase agreement to acquire GMR Kamalanga (1,050MW). The deal is valued at a maximum amount of Rs 53 bn (implying an EV of Rs 51 m/MW). We see the transaction as being value accretive for JSWE, given the strategic location of the plant, room for merchant volumes, and the company’s ability to reduce interest and O&M costs post acquisition. Moreover, the move lends visibility to JSWE’s capital deployment. We raise our FY21/22 EPS estimates by 15/8% to account for the takeover of Kamalanga from FY21. Upgrade to Buy with a TP of Rs 78/sh (23% upside).
GMR Kamalanga – asset strategically located near coal belt: GMR Kamalanga (3x 350MW) is strategically located in Orissa near the coal belt region. Accordingly, variable costs are low at just Rs 1.5-1.6/kWh.
