JSW Energy Q1 Results JSW Energy, a part of JSW Group engaged in generation of power has reported 3% increase in consolidated sales for the quarter ended Jun 2014 to Rs 2558.32 crore. But with 190 bps contraction in operating profit margin the operating profit was lower by 2% to Rs 906.18 crore. However the net profit (after minority interest) was up by 52% to Rs 325.47 crore. Sharp jump at bottom-line despite weak operating performance was largely on account of deflated base. The profits of corresponding previous period was lower by EO item (gross of tax) of Rs 187.18 crore compared to nil in Q1FY15. Operational income excluding other operational income stood higher by 4% to Rs 2521 crore and this is largely due to higher income from sale of power. The revenue from sale of power was up by 16% to Rs 2370 crore facilitated by higher power sales volume (up 13% to 5605 million units). Though average realization for the quarter was lower at Rs 4.21/unit (compared to Rs 4.27/unit in Q1FY14) the higher sales volume facilitated revenue growth. With net generation for the quarter down by 2% (to 5007 million units) the higher sales volume seems largely on account of banked power volume/inventory. The transmission revenue for the quarter was flat at Rs 25 crore and income from power trading was lower by sharp 65% to Rs 126 crore. Operating margin for the quarter contracted by 190bps to 35.4%. The fuel cost (as % to sales) was higher by 300 bps to 45.9%. The staff cost was flat at 1.4%. On the other hand the power purchase cost and other expenses were lower by 940 bps (to 4.9%) and 80 bps (to 4.9%) respectively. Higher fuel cost is primarily due to adverse movement of the rupee dollar exchange rates over the comparable period which was partially offset by a decline in international coal prices. Other income was down by 8% to Rs 41.87 crore. The interest cost was higher by 7% (to Rs 293.09 crore) and depreciation was down by 3% (to Rs 194.84 crore) respectively. Lower depreciation is largely on account of change in depreciation policy. The group has revised depreciation as per the provision of Part B/Part C of schedule II of companies Act 2013, which is effective from April 1, 2014. Consequently the depreciation for the quarter was lower by Rs 10. 72 crore. Thus the PBT before EO stood lower by 7% at Rs 460.12 crore. The EO Expenses was nil for the quarter compared to an expenses of Rs 187.18 crore in the corresponding previous period. EO expenses in corresponding previous period is of forex change. Thus on deflated base, the PBT (after EO) was up by 51% to Rs 460.12 crore. The taxation was up by 43% to Rs 124.80 crore. Thus the PAT for the quarter stood at Rs 335.32 crore, a rise of 54%. The profit in associate is up by 95% to Rs 8.97 crore and minority interest being share of profit amounting Rs 0.88 crore compared to share of loss of Rs 0.48 crore in the corresponding previous period. Eventually the Net profit (after MI) was lower by 52% to Rs 325.47 crore. Yearly Performance On lower consolidated sales (down 3% to Rs 8705.42 crore) the operating profit stood higher by 16% to Rs 3251.40 crore as OPM stand expanded by 600 bps to 37.3%. But after accounting for lower other income, higher interest and depreciation cost, the growth at PBT before EO moderated to 4% (to Rs 1437.72 crore). The EO expenses was higher by 92% to Rs 377.69 crore and thus dragged the PBT after EO stood declined by 11% to Rs 1060.03 crore. After accounting for taxation, share of loss from associate and minority interest the net profit was eventually lower by 16% to Rs 754.74 crore. Outlook The power sector continues to reel under low offtake, falling tariff, increasing costs and fuel uncertainty. However the new government appears to be focused upon addressing concerns around adequate fuel availability, power purchase agreements and thrust on T&D development which should augur well for the industry in the long term. Meanwhile, Indian economic recovery seems to be gathering pace. The new governments efforts to revive the investment cycle, faster implementation of reforms, addressing of supply side bottlenecks coupled with global demand recovery should result in a improvement in manufacturing activities over the medium term. May 2014 industrial production grew by 4.7%yoy, a 19 month high growth, with pickup in mining and manufacturing activities. We believe demand should be better in H2FY15. In a well supplied market the international thermal coal prices remain range bound as slower than expected global recovery and lackluster Chinese demand have a bearing on commodity prices as well as freight rates. Imported coal cost is not expected to change materially as recent increase in coal import duty has been offset to some extent by marginal appreciation in the Indian Rupee. Pursuant to pick up in economic activity the pressures on margins from merchant sale are expected to ease for power developers. Other developments Promoter shareholding as end of Jun 2014 stood at 75%, which is unchanged compared to March 2013 and Jun 2013 quarter end. The stock hovers around Rs 82.20.
Posted on: Thu, 24 Jul 2014 07:24:46 +0000
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