Fundamental Analysis of SJVN Ltd
(Sector: Power Generation/Distribution)
Listed on BSE and NSE
CMP: 89 Rs/share at 3pm - 21 - 12 - 2023
The Ministry of Power echoes with power “ One Nation One Grid.”
“Integration of Regional Grids and thereby Establishment of National Grid.”
The Union Budget 2023 allocated the highest ever for the ministry to the Power Sector, over Rs 160 billion, an increase of 29%
Company Synopsis
SJVN was formerly known as Satluj Jal Vidyut Nigam, a Mini Ratna, under the administrative control of the Ministry of Power, Government of India. It is a mid-cap company with a market capitalization of Rs 36,000 crores. SJVN, a 35-year-old company, is engaged in the business of power generation and engineering consultancy. The Government of India and the Government of Himachal Pradesh hold the company jointly. The promoter holding as of September 2023 is 81.85% stake.
The company is primarily into hydropower production, wind power, solar power, and pumped-storage power plants. The noteworthy projects of the power company are Nathpa Jhakri Hydro Power Station (NJHPS), Khirvire Wind Power Station, Rampur Hydro Power Station (RHPS), Charanka Solar Power Station, and Sadla Wind Power Station. It has six installed plants across Gujarat, Maharashtra, Arunachal Pradesh, Uttarakhand, Himachal Pradesh, and Nepal. Top customers include Govt. of Himachal, U.P. Power Corp, J&K, and Punjab State Power Corp.
Industry at Glance
Hydropower generation, is one of the underdeveloped sectors in India with few players in the industry. At the end of FY22, the total installed hydropower capacity was 46,722.52 MW. The report bodies suggest India has a potential energy production capacity of about 1,50,000 MW attributed to its geographical assets(Himalayan region).
Hydropower, is expected to remain the world’s largest source of renewable electricity generation through the 2030s. The power demand, is expected to rise, as the population is predicted to reach 1.51 billion by then. The Union Government has given a big target of 500 GW of power generation capacity by 2030, hence a favourable opportunity for clean energy companies, as the operational green capacity was only 167.5 GW at the end of CY22.
SJVN - Financials
Source: Screener
Cash conversion cycle: The duration of cash cycle is getting shorter as it signifies, business is operating more efficiently.
The Road Ahead for SJVN
New Projects, Renewable Energy, and Expansion
 SJVN has set up a new subsidiary SJVN Green Energy dedicated towards its green energy initiatives under the Renewable Energy Implementing Agency assignment provided by the government.
 SJVN expects to generate an additional profit of roughly Rs 4000 crores in the next five years through REIA.
 Through REIA, SJVN will collect demand from states, invite bids from developers, and sign power purchase agreements for renewable energy projects.
 SJVN plans to bid for a total capacity of 10 GW/year through REIA, and the target is to reach 25 GW by 2030.
 The power producer has set audacious targets of achieving operational capacities of 5,857 MW (by FY24), 25,000 MW( by FY30), and 50,000 MW (by FY 40.)
 SJVN has floated tenders for a 1,500 MW capacity for Round-The-Clock (RTC) power, which combines wind, solar, and battery energy storage systems.
 The lowest price discovered for RTC power was INR4.38 paisa/unit.
 SJVN will create a payment security fund and sign a tri-party agreement to mitigate the risk of default payment.
 SJVN is confident in achieving the target of 10 GW annually due to increasing energy demand and the suitability of the RTC power model.
Capex
 SJVN’s capex target for this year is INR 10,000 crores.
 SJVN achieved INR3,800 crores in the first half.
 The capex target for next year is INR 12,000 crores.
Financial Performance from the Concall of Nov 2023
• SJVN Limited reported a decrease in generation and revenue from operations in Q2 FY24 due to lower water discharge in the rivers and floods that forced the shutting down of projects.
• Total income increased marginally due to higher other income.
• Profit before tax increased marginally, while profit after tax decreased.
• Net worth and book value increased.
• Expenses increased marginally.
Spotlight on SJVN’s Journey
Strengths
• The company has a high promoter holding of 81.85%
• The company with zero promoter pledge.
• Consistent highest return stock over five years
• Increasing Revenue every quarter for the past two quarters.
• Increasing Profits every quarter for the past two quarters.
• Healthy liquidity position with a current ratio of 2.31.
• Debtor days have improved from 87.00 to 34.00 days
• The company’s PEG(Price/Earnings-to-growth) ratio is 0.81
• The company has a strong degree of Operating Leverage. Average operating leverage stands at 4.59.
Weakness
• Promoters decreased shareholding QoQ in September 2023.
• Return on Assets has declined in the last two years.
• A decline in Quarterly Net Profit with a falling Profit Margin (YoY)
• The company has a low return on equity of 11.0% over the last three years.
In June 2023, the promoter pledge was 86.77% (Image Source: Finology)
|
P/E RATIO |
34.59 |
|
Industry P/E |
21.81 |
|
P/B Ratio |
2.50 |
|
Book Value |
36.46 |
|
Debt to Equity |
1.01 |
|
ROE |
7.09% |
|
EPS (Rs) |
2.64 |
|
Dividend Yield |
1.94% |
|
Face Value |
10 |
|
Beta |
1.29 |
|
52 Week Low-High |
30.40 - 100.40 |
Peer Comparison
1. NTPC|CMP: 297.65|P/E 15.08
2. Adani Green| CMP: 1452.15|P/E 157.89
3. Power Grid Corporation| CMP: 227.15|P/E 13.75
4. Adani Power| CMP: 508.80| P/E 9.52
5. Adani Energy |CMP: 998.90| P/E 84.77
6. TATA Power|CMP: 320.15| P/E 29.94
7. JSW Energy| CMP: 405.05| P/E 41.87
(Please note that the above list is for educational purposes only and not a recommendation. Do your research before investing.)
Key Observations
Promoters have decreased holdings from 86.77% to 81.85% in Sept 23 Quarter.
FII/FPI have decreased holdings from 1.40% to 0.91% in Sept 23 Quarter.
Mutual Funds have increased holdings from 4.08% to 4.14% in Sept 23 Quarter.
Number of MF schemes increased from 7 to 12 in Sept 23 Quarter.
Institutional investors have increased holdings from 5.73% to 6.66% in Sept 23 Quarter.
In August 2023, the company was conferred with ‘2nd Annual Greentech Quality and Innovation Award 2023’ under the category of Quality Improvement
Conclusion: A variety of factors, such as financing opportunities, government support, rising energy demand from residential/commercial consumption, and more will drive the SJVN’s growth. For the power sector, the overall fundamentals will remain strong, market with enormous growth potential, renewable energy is emerging as a major source of power; however the challenges for this sector should not be undermined.
What do you think?
Will the company be able to accomplish the set targets?
Will it again reach to its 100-odd levels?
What can be the possible hurdles on its growth path?
Prepared by: Manali S
Ahmedabad
info@smartinvestment.in
Source: https://powermin.gov.in/, India Brand Equity Foundation, Screener, Moneycontrol, Finology
Disclaimer: Do not practice investment recommendations or strategies based on the above study. The information is compiled for study purpose; to give an insight of one of the companies from many. The report is made with due care and information is sourced from the liable websites and medium.