Shares of JSW Energy Ltd. experienced a significant downturn in early trading on Tuesday, plunging 8.09% to hit a low of Rs 512.10. This sharp decline occurred despite the company reporting strong operational performance for the March 2026 quarter (Q4 FY26).
Strong Operational Performance Overshadowed
For Q4 FY26, JSW Energy announced a net revenue of Rs 4,500 crore, which included a one-off revenue of Rs 100 crore. The adjusted revenue stood at Rs 4,400 crore, marking a 38% year-over-year increase and aligning with JM Financial's estimates, while exceeding consensus by 9%. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) also saw a robust 78% year-over-year rise, reaching Rs 2,140 crore. However, adjusted Profit After Tax (PAT) decreased by 36% year-over-year to Rs 260 crore.
The company remains confident in achieving its ambitious target of 30 GW capacity by 2030, with 13.4 GW currently operational, 14 GW under construction, and a pipeline of 4.6 GW. Management has indicated a strategy to maintain some thermal capacity while moderating renewable energy additions post-guidance of 3 GW in FY27.
Why the Market Reacted Negatively
Despite the strong operational metrics, several factors contributed to the negative investor sentiment, primarily concerns over elevated valuations and rising costs. Brokerages highlighted these issues:
- Valuations: JM Financial noted that following a recent rally, JSW Energy shares were trading at an expensive valuation of 12.5x EBITDA (compared to a historical median of 11.3x) and 2.7x Price-to-Book (P/B) for FY28E (vs. 2.3 historical median).
- Increased Costs: Both JM Financial and Elara Capital pointed to a sharp rise in depreciation and interest costs. These increases are primarily attributed to recent acquisitions and ongoing capital expenditure projects, which weighed heavily on profitability and led to a drop in Profit Before Tax (PBT).
Brokerage Outlook and Ratings
The market reaction prompted some brokerages to revise their outlook on JSW Energy shares:
JM Financial downgraded the stock from 'Buy' to 'Add', revising its SOTP-based target price to Rs 627 from Rs 614 earlier, citing the expensive valuations.
Elara Capital also turned cautious, revising its recommendation from 'Buy' to 'Accumulate' and raising its target price to Rs 602 from Rs 581, based on 11x FY28E EV/EBITDA. They acknowledged the robust operational performance but emphasized the impact of higher costs on profitability.
In contrast, Motilal Oswal Financial Services maintained a positive stance, reiterating its 'BUY' rating with a target price of Rs 640. Their valuation assigns 12x FY28E EBITDA to the company's core renewable business and 9x Dec'27E EBITDA to its thermal business.
The company's recent acquisitions and capex-heavy projects have led to elevated debt levels. However, successful turnaround of stressed assets is beginning to show profitable growth, with Net Debt/EBITDA moderating to 6x in FY26 from 7.8x in FY25, and EBITDA/MW improving from 5.4 in FY25 to 7.8 in FY26.