'Buy' JSW Energy — O2 Power Acquisition Unlocks Value, Says Motilal Oswal; Sees 29% Upside

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.Click on the attachment to read the full report:.JSW Energy Ltd. announced a definitive agreement to acquire O2 Power Midco Holdings Pte. Ltd., O2 Energy SG Pte. Ltd., and their subsidiaries (O2 Power) for a total cash consideration of Rs 124.68 billion. We view this move positively, and following are the key implications according to us: Up to Rs 57/share value unlocking upon deal completion: With listed Renewable Energy generation companies currently trading at ~15 times EV/Ebitda, the acquisition of 4.7 GW high-quality renewable assets at ~seven times EV/Ebitda unlocks ~Rs 57 in value, we estimate.High-quality assets: We like the overall quality of assets. Key highlights include:interest cost for O2 Power at 8.8% is competitive and at par with JSW Energy itself;receivable days at 43 for the asset portfolio are in fact lower than JSWE’s receivable days at 68 (FY24);87% of the portfolio is backed by utilities such as SECI/NTPC/SJVN, while the 13% C&I portfolio largely comprises AA or higher rated issuers;we like the diverse nature of the asset portfolio encompassing solar, wind, and niche segments such as FDRE. High transmission and land visibility: O2 Power has full transmission connectivity for its entire 4.7GW portfolio, and the entire under-construction pipeline is backed by Power Purchase Agreements. We believe this is crucial in providing confidence to the market about the timely execution of the project pipeline. Savings from in-house EPC/O&M: Lastly, while the steady-state Ebitda from the 4.7GW portfolio is guided at Rs 37.5 billion, we believe there is potential for further upside due to JSW Energy carrying out the EPC/O&M of assets in-house. Transitory rise in leverage: Should both the KSK Mahanadi and O2 Power deals be consummated by the end of FY25, we estimate JSW Energy’s net debt/Ebitda for FY26 to rise to 5.4 times (current estimate: 4.7 times). However, given the strong operating cash flow generation and the company’s ability to raise funds, we believe the transitory rise in leverage should not be a major concern. We have a buy rating on JSW Energy with an SOTP-based target price of Rs 810/share..Stock Recommendations Today: Adani Enterprises, BlackBuck, JSW Energy On Brokerages' Radar.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

'Buy' JSW Energy — O2 Power Acquisition Unlocks Value, Says Motilal Oswal; Sees 29% Upside

JSW Energy announced a definitive agreement to acquire O2 Power Midco Holdings Pte. Ltd., O2 Energy SG Pte. Ltd., and their subsidiaries (O2 Power) for a total cash consideration of Rs 124.68 billion.

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