JSW Energy shares jumped 8% today; target Rs 545, says Morgan Stanley

Shares of JSW Energy Ltd were trading 8 per cent higher in Friday's trade after foreign brokerage Morgan Stanley initiated 'overweight' on the stock with a target price of Rs 545, saying JSW Energy is among the fastest-growing utilities, with well-integrated business model, strong execution record and reasonable balance sheet. 

Following the development, the stock rose 7.54 per cent to hit a high of Rs 503.70. JSW Energy is growing its renewable energy business, expanding its thermal business inorganically and is investing in storage assets. Morgan Stanley sees JSW Energy's renewable energy Ebitda to grow at 52 per cent compounded annually over FY24-28. Overall, it expects Ebitda for JSW Energy to grow at 24 per cent annually during the same period. 

Earlier this week, MOFSL reiterated its 'Buy' rating on JSW Energy with an SoTP-based target price of Rs 705. The stock is in news as the company is looking to acquire a thermal plant KSK Mahanadi Power Company (KMPCL). 

While investors are concerned about leverage, MOFSL said the net debt to Ebitda ratio for FY26 will rise only marginally to 5.6 times from current estimate of 5.1 times in FY25 and could decline slightly in FY27.

"The RP has acknowledged claims of Rs 29,330 crore from financial creditors. Lenders are expected to recover Rs 26,485 crore, representing about 90 per cent of the total claims. This includes JSW’s offer of Rs 15,990 crore, as well as Rs 10,500 crore in cash and undisputed fund receivables. However, factoring in the 26 per cent equity stake provided to lenders, the total recovery is expected to exceed 100 per cent, as noted by a lender involved in the process," MOFSL said.

MOFSL values JSW's thermal assets at 9 times FY27 Ebitda, renewable energy at 15 times FY27 Ebitda, hydro at 1.5 times FY27E book value and green hydrogen equity at a 2 times.

"Additionally, the company's stake in JSW Steel is valued at a 25 per cent discount to the current market price, acknowledging the strategic significance of this holding while incorporating a conservative valuation approach. By aggregating the values from these different components, the total equity value of JSWE was determined, leading to a target of Rs 705," it said.