JSW Energy Surges 3% as Morgan Stanley Sees 16% Upside – Is This the Next Big Power Stock?

JSW Energy shares jumped 3.3% to ₹484 after Morgan Stanley reaffirmed its ‘overweight’ rating with a ₹545 target, implying a 16.5% upside. The brokerage is bullish on the company’s strong position in India’s energy transition, green energy expansion, and thermal power acquisitions. Despite a 27% YoY profit decline in Q3 FY25, analysts project a 24% EBITDA CAGR from FY24-28, with renewable energy leading growth.

CONTENTS:

• Power Stock to Buy: MOFSL Predicts 55% Upside for Large-Cap Power Stock; Shares Down 44% from 52-Week High
• JSW Energy Shares Gain 3% as Morgan Stanley Maintains ‘Overweight’ Rating, Sees 16% Upside

JSW Energy Surges 3% as Morgan Stanley Sees 16% Upside – Is This the Next Big Power Stock?

Motilal Oswal has reaffirmed its Buy rating on JSW Energy, setting a target price of ₹705 per share, indicating a potential upside of nearly 60% from current levels. The brokerage firm attributes this optimistic outlook to JSW Energy’s planned acquisition of KSK Mahanadi Power Company (KMPCL), which is expected to bolster the company’s growth and stock performance.

Three Key Reasons Behind Motilal Oswal’s Bullish View on JSW Energy

1. Acquisition of KSK Mahanadi Power Company (KMPCL)
   • JSW Energy aims to acquire KMPCL for ₹16,000 crore.
   • The company has already secured approval from the Committee of Creditors, received a Letter of Intent (LoI) from the Resolution Professional, and obtained clearance from the National Company Law Tribunal (NCLT).
   • It is currently awaiting approval from the Competition Commission of India (CCI), with final authorization expected by Q1 FY26.
2. Lenders Expect Full Recovery of Claims
   • KMPCL operates a 3.6 GW coal-fired power plant in Chhattisgarh, with 1.8 GW already functional and another 1.8 GW in brownfield expansion.
   • To facilitate the acquisition, JSW Energy has agreed to grant lenders a 26% equity stake.
   • The transaction is expected to enable lenders to recover ₹26,485 crore—approximately 90% of the total claims—through a mix of JSW’s offer, ₹10,500 crore in cash, and fund receivables.
   • With the inclusion of the equity stake, total recovery may exceed 100%, according to lenders involved in the process.
3. Capacity Expansion and Valuation Outlook
   • KMPCL’s operational capacity includes three 600 MW units, with agreements for power supply to UPPCL (1,000 MW net), TANGEDCO (500 MW net), and CSPTCL (5% of net power exports). The remaining 90 MW is sold through short-term contracts.
   • The company has secured long-term coal procurement arrangements and is constructing an additional 1,800 MW capacity, with one unit already 40% complete.
   • Motilal Oswal estimates that the net present value (NPV) for JSW Energy’s 74% stake in KMPCL would be ₹16 per share, assuming no brownfield expansion.
   • The brokerage forecasts a Return on Equity (RoE) of 6% in FY27 and 1% in FY28, with a subsequent improvement to 15% by FY32 as the expanded capacity begins contributing to revenue.

Key Risks to the Outlook

Despite the optimistic forecast, Motilal Oswal outlines some risks:

• The additional 1.8 GW capacity is expected to be operational by FY29, but delays could impact financial projections.
• The Power Purchase Agreement (PPA) with TANGEDCO expires in FY29, and a renewal at ₹5.4/kWh is assumed. If not secured, this could affect profitability.
• KMPCL has contingent liabilities of ₹402 crore, and clarity is needed on whether JSW Energy would bear responsibility in case of an adverse ruling.

Stock Performance

JSW Energy’s stock has gained over 3% in intraday trading and has been rising for the past five days, adding nearly 3%. However, year-to-date (YTD), the stock has declined by around 27%.

Power Stock to Buy: MOFSL Predicts 55% Upside for Large-Cap Power Stock; Shares Down 44% from 52-Week High

Motilal Oswal Financial Services Ltd. (MOFSL) has identified JSW Energy as a promising large-cap power stock, forecasting a 55% long-term upside. The company’s current market capitalization stands at ₹79,514.73 crore, with its share price at ₹454.95, marking a 44% decline from its 52-week high of ₹804.95.

Power Sector Outlook and JSW Energy’s Position

With the summer season approaching, electricity consumption is expected to surge, bringing power sector stocks into focus. JSW Energy, a key player in thermal, hydro, wind, and solar power generation, is well-positioned to benefit from increased demand.

JSW Energy’s Acquisition of KSK Mahanadi Power Company (KMPCL)

• JSW Energy is set to acquire KSK Mahanadi Power Company (KMPCL), a 3,600 MW power plant, of which 1,800 MW is currently operational.
• The Creditors’ Committee approved the acquisition in January, and it has received clearance from the National Company Law Tribunal (NCLT).
• The final Competition Commission of India (CCI) approval is awaited, with the acquisition expected to be finalized by Q1 FY26.
• Under this deal, JSW Energy will hold a 74% stake, while creditors will retain 26% ownership.
• The Net Present Value (NPV) of JSW Energy’s stake is ₹27 per share.

JSW Energy’s Growth Plans

JSW Energy has set a target of 10 GW power capacity by FY25. The company’s management confirmed in a recent conference call that it is on track to achieve this goal.

• In Q3 FY25, JSW Energy acquired 4,696 MW from O2 Power.
• The company also acquired a 125 MW renewable energy plant from Hetero Group.
• As of Q3, JSW Energy’s total power generation capacity reached 6,751 MW.

JSW Energy Share Price Target

MOFSL has set a ₹705 target price for JSW Energy, based on a Sum of the Parts (SoTP) valuation.

• The stock closed at ₹454.95 on Wednesday, making the target price 55% higher than its current value.
• In September 2024, JSW Energy hit a 52-week high of ₹805.
• The stock reached a low of ₹420 on February 17, 2025, marking a 40% drop from its peak.

JSW Energy Shares Gain 3% as Morgan Stanley Maintains ‘Overweight’ Rating, Sees 16% Upside

Shares of JSW Energy surged 3.3% to ₹484 in early trading on February 21, marking a fourth consecutive session of gains. The rally follows Morgan Stanley’s reaffirmation of its ‘overweight’ rating, with a target price of ₹545, suggesting a 16.5% upside from the previous close of ₹468 on the National Stock Exchange (NSE).

Stock Performance & Market Outlook

• JSW Energy’s stock has had a challenging start to 2025, declining 27% year-to-date.
• The stock is currently 42% below its all-time high of ₹809.
• At 9:20 AM, shares were trading at ₹480, reflecting a 2.5% increase from the last close.

Morgan Stanley’s Bullish Stance on JSW Energy

The brokerage firm remains positive on JSW Energy’s business model, citing its strong position in India’s energy transition and security. The company is actively expanding its green energy segment, investing in storage solutions, and growing its thermal power business through acquisitions.

Morgan Stanley projects:

• 24% CAGR in EBITDA from FY24-28.
• 52% CAGR in renewable energy EBITDA growth.
• Market share expansion through competitive tariff bids.

Q3 Earnings Report

JSW Energy, a leading private power producer under the JSW Group, reported a 27% YoY decline in consolidated net profit for Q3 FY25, impacted by lower revenues from its thermal and hydropower operations.

• Net profit: ₹168 crore (vs. ₹231 crore in Q3 FY24).
• Revenue: ₹2,640 crore (vs. ₹2,661 crore in Q3 FY24).
• The decline was attributed to lower short-term realizations at its Ratnagiri and Vijayanagar plants, despite additional sales from new renewable capacity and Utkal Unit-1.