Posted on February 20, 2025, by Niftynews
JSW Energy share price has recently caught the attention of investors and analysts alike, with Motilal Oswal forecasting a 60% upside from the current levels. Motilal Oswal has reiterated its Buy rating on JSW Energy, setting a target price of ₹705 per share, which reflects a substantial increase from its current trading price. In this article, we’ll delve into the factors that have contributed to this bullish outlook for JSW Energy’s share price.
Key Reasons for Motilal Oswal Bullish Outlook on JSW Energy Share Price
Motilal Oswal has identified several factors that could fuel a rise in JSW Energy share price. Here are the top three reasons:
1. Acquisition of KSK Mahanadi Power Company (KMPCL)
One of the main drivers of JSW Energy share price is the company’s acquisition of KSK Mahanadi Power Company (KMPCL). JSW Energy has committed to acquiring KMPCL for ₹16,000 crore, with the acquisition deal already receiving approval from the Committee of Creditors (CoC) and the National Company Law Tribunal (NCLT). The company has also secured a Letter of Intent (LoI) for the acquisition, pending approval from the Competition Commission of India (CCI), which is expected by Q1 FY26.
The acquisition adds a 3.6 GW coal-fired power plant in Chhattisgarh to JSW Energy portfolio, which includes 1.8 GW of operational capacity and an additional 1.8 GW in brownfield expansion potential. The KMPCL acquisition is seen as a strategic move to expand JSW Energy’s operational capacity, which could significantly impact its share price going forward.
2. Financial Recovery for Lenders with High Upside Potential
Motilal Oswal has noted that the KMPCL acquisition offers strong upside for lenders. The acquisition deal includes a provision of 26% equity stake for lenders, enabling them to recover approximately ₹26,485 crore, which accounts for around 90% of the total claims. Due to the significant financial distress KMPCL was facing, this recovery is considered a major positive for JSW Energy share price as it positions the company for long-term financial stability.
In fact, with the 26% equity stake provided to lenders, Motilal Oswal estimates that the total recovery could exceed 100%. This financial stability will bolster investor confidence and may drive JSW Energy stock price higher in the future.
3. Capacity Expansion and Long-Term Power Purchase Agreements (PPAs)
Motilal Oswal has highlighted JSW Energy’s strong prospects for long-term revenue growth, primarily driven by the expansion of its operational capacity. KMPCL’s existing 1.8 GW operational capacity, combined with the 1.8 GW brownfield expansion, could add significant revenue generation in the coming years.
Currently, the company has Power Purchase Agreements (PPAs) with major buyers such as UPPCL, TANGEDCO, and CSPTCL, with a substantial portion of the capacity sold through long-term agreements. The additional 1.8 GW in expansion is expected to further strengthen JSW Energy’s share price, as the company secures additional PPAs and coal procurement agreements.
Valuation Outlook for JSW Energy Share Price
Motilal Oswal also provided insights into the valuation of JSW Energy’s share price, estimating a Net Present Value (NPV) of ₹16 per share without the brownfield expansion. However, with the expansion plans in place, the value could significantly increase in the coming years. The company’s projected Return on Equity (RoE) and Return on Capital Employed (RoCE) will improve as the expansion project progresses, potentially boosting JSW Energy stock price even further by FY32.
Key Risks to JSW Energy Share Price Outlook
While Motilal Oswal remains bullish on JSW Energy share price, there are a few risks to keep in mind:
- PPA Expiry: The Power Purchase Agreement with TANGEDCO is set to expire in FY29, and it is unclear whether a renewal at the same price point will be achievable.
- Contingent Liabilities: The plant faces some contingent liabilities totaling ₹402 crore, which need clarification from JSW Energy’s management regarding their impact on the company’s financials.
JSW Energy Share Price Performance
As of today, JSW Energy share price has increased by over 3% intra-day, and the stock has been trending upwards for the past five days. However, it is worth noting that the stock is down approximately 27% year-to-date (YTD). Despite this, Motilal Oswal’s target price indicates significant potential upside in the near future.
Conclusion
Motilal Oswal’s bullish target of ₹705 for JSW Energy share price represents an exciting growth opportunity for investors. The company’s acquisition of KMPCL, its capacity expansion plans, and its ability to recover financial distress for lenders are key factors driving the optimistic outlook. While risks exist, especially related to PPAs and contingent liabilities, the company’s growth potential remains strong.
With a 60% upside potential, JSW Energy share price may continue to rise, making it a stock worth watching for long-term investors.
