JSW Energy Motilal Oswal's Top Pick For 2025, Nomura Reiterates 'Buy'

JSW Energy Ltd. is Motilal Oswal's top pick in the power utility sector for 2025. The brokerage believes that the company's strong position in renewable energy augurs well for its growth prospects. MOSL sees a significant upside for the stock, with a target price of Rs 816, representing a 27% potential upside from its current price of Rs 644.

JSW Energy’s strategy includes expanding its installed capacity to 20 GW by financial year 2028, with a substantial focus on wind power, which the company sees as crucial for its ability to participate in the emerging market for Firm and Dispatchable Renewable Energy (FDRE).

With over 11 GW of FDRE tenders already issued in 2023, the brokerage believes that JSW’s leadership in wind energy gives it a competitive edge in securing these lucrative contracts. Additionally, the company has secured long-term power purchase agreements (PPAs) for 66% of its renewable energy pipeline, ensuring strong earnings visibility.

Motilal Oswal’s report also highlights JSW Energy’s ability to sustain high returns through strategic diversification and its robust cash flow generation, despite challenges in securing PPAs for new projects. With a favorable market position and operational experience, especially in wind energy, the brokerage remains optimistic about the company’s growth trajectory.

Nomura has reaffirmed its “Buy” rating on JSW Energy, maintaining a target price of Rs 885. The brokerage highlights the company’s strong growth outlook, backed by a robust 38% Ebitda compound annual growth rate projected from financial year 2024 to financial year 2027.

A key driver for this optimism is JSW Energy’s recent agreement to acquire O2 Power for Rs 12,500 crore, which will increase its renewable energy portfolio by 23%, pushing its locked-in capacity to 25 GW. The acquisition includes a mix of solar, wind, hybrid, and Firm and Dispatchable Renewable Energy (FDRE) projects, all of which offer attractive long-term earnings potential. Nomura notes that the deal’s valuation, at 7.1x to 8.3x, is favorable compared to its listed peers, reinforcing the attractiveness of the acquisition.

The addition of O2 Power’s portfolio, with long-term PPAs in place, will significantly enhance JSW Energy’s earnings visibility and provide further upside from its merchant power capacities. Nomura also points to JSW’s strong operational cash flow generation and its strategy to meet future energy transition goals, including green energy and green hydrogen initiatives. Given these factors, Nomura is confident that JSW Energy is well-positioned for continued growth, making it a top pick for investors in the sector.