Company Overview:

SJVN Limited (SJVN) designs, plans, develops, examines, executes, operates and maintains the hydroelectric power projects. It has power projects including hydroelectric projects in Uttarakhand, Himachal Pradesh and Arunachal Pradesh; thermal Power Project in Bihar, a power transmission project in Nepal; Wind Power project in Maharashtra and Solar Power Projects in Gujarat and Rajasthan. The company classifies its business operations into one reportable segment, namely generation and sale of hydroelectric power. It sells electricity to bulk customers comprising mainly of electricity utilities owned by State Governments on long term power purchase agreements. SJVN has projects in India, Nepal and Bhutan of different capacities and in different stages of construction, survey and investigation. The company manages and operates Hydro Power Station (HPS) projects which include Nathpa, Jhakri Hydro Power Station (NJHPS) and Rampur Hydro Power Station (RHPS).

Business Descriptions:

The company's 1,500 MW Nathpa-Jhakri Hydro Electric Power Station is in Himachal Pradesh. The Nathpa Jhakri plant is designed to generate 6,612 million units of electricity annually. SJVN's Rampur Hydro Electric Project has a generation capacity of 412 MW and is located in Himachal Pradesh. Power generated from Rampur HPS is distributed to Northern Regional States namely, Himachal Pradesh, Haryana, Jammu and Kashmir, Punjab, Rajasthan, UP, and Uttarakhand. The company's projects under survey and investigation include Luhri HEP (172 MW), Jangi Thopan Powari HEP (780 MW), Reoli Dugli HEP (430), Purthi HEP (230 MW), Tandi and Rashil HEPs (104 MW and 130 MW), Sach Khas HEP (267 MW), and Bardang HEP (138 MW) in Himachal Pradesh; and Devsari HEP (194 MW), Etalin HEP (3,097 MW), Attunli HEP (680 MW), Mihumdon HEP (400 MW), Emini HEP (500 MW) and Amulin HEP (420 MW), in Uttarakhand.

SJVN's thermal project under survey and investigation include Buxar Thermal Project (1320 MW). The plant is located at Chausa village in Buxar district. The company signed MoU between Bihar State Power Holding Company Limited (BSPHCL) and Bihar Infrastructure Company (BPIC) for the implementation of Buxar Thermal Power Plant (BTPP) in Bihar. SJVN has also entered into wind and solar energy development with setting up of 47.6 MW Khirvire Wind Power Project in the state of Maharashtra. The project comprises 56 numbers of Wind Energy Generators (WEGs). Each wind power turbine has the capacity to generate 850 kV of energy. The company's solar power generation operations include Charanka Solar Power Station, Solar Power Plant at NJHPS, and Parasan Solar Power Station with total installed capacity of 81.3 MW. SJVN has also entered into power transmission sector by partnering with others companies to lay out the Cross Border Indo-Nepal Transmission Line. Cross-Border Inter State Transmission Link for trade of Power between Nepal & India is being developed by Joint Venture Company (CPTC), wherein SJVN has 26% interest along with IL&FS Energy Development Company Ltd. (38%), Powergrid (26%) and Nepal Electricity Authority (NEA) (10%). The transmission line is 217 km long with 400kV, D/C line. The company also provides consultancy services such as feasibility and planning of hydro-electric projects, detailed structural designs and evaluating design parameters, contract administration, construction, supervision and commissioning.

TECHNICAL VIEW:

SJVN has formed a Triangular flag pattern with resistance near levels of 83-85 Levels and Support near 65-63 Levels. We recommend a Buy in SJVN near levels of 65-68 with Important support near levels of 61 for price target of 98. SJVN after strong price volume breakout above levels of levels of 62 on 7th Sept 2023 moved toward levels of 83 on 12th sept 2023.

Management on track to achieve 25GW installed capacity by FY30:

There are 16 projects under construction, with 4,500MW of total capacity. In the next three years, SJVN has ambitious plans to expand its installed capacity six-fold. It has ~10GW of capacity in various stages of development. During FY24, FY25, and FY26, the company aims to add 1,500MW, 5,200MW, and 3.300MW, respectively, to its capacity. It has won five projects with cumulative capacity 5,097MW projects in Arunachal Pradesh with an expected investment of INR 500bn.

Conference call highlights:

• Physical progress on critical projects: Physical progress for the Buxar thermal plant is 78% with the unit one expected to be commissioned in March 2024 and the second unit expected to be commissioned in September 2024. Total capex was INR 104bn of which INR 82 bn has been incurred. Physical progress on Arun HEP is 70% scheduled to be commissioned by September 2024. Of the total INR 70bn earmarked for this project, INR 45 bn has been incurred.
• Regulated equity: Regulated equity for commissioned projects stands at INR 62bn. Regulated equity for the under-construction project will be around INR 78bn.
• Incremental revenue from capacity addition: SJVN has outlined its expansion plans, targeting the incorporation of 1,500MW, 5,200MW and 3,300 MW of additional capacity in FY24, FY25 and FY26, respectively. Capacity addition is expected to yield incremental revenue contribution of ~INR 28bn, INR 70bn, and INR 30bn, respectively.
• Consolidated debt stood at INR 150bn as on June 2024 and is expected to increase to INR 270bn by FY26.
• Incentives decline on account of new DSM regime: Incentives in Q1FY24 came in at INR 579mn reduction of 22% YoY from INR 875mn last year on account of changes in the new DSM regime.
• Plant availability factor remains healthy: Both hydro projects are running at full load capacity with plant availability factor of 110%
• Recoup revenue loss due to subdued generation in the upcoming quarters: Management is hopeful for an improved generation in Q2, due to better water availability during the Monsoon and expects generation to reach the levels of the past year. It expects revenue to improve from Q2fY24 on account of better water supply and incremental capacity addition in FY24.

Our view

We retain our positive view, given: 1) 10GW capacity addition over FY26E, and 2) defensive growth play with no fossil fuel risk. We expect the regulated equity to jump 98% to INR 112.7bn in FY25E from INR 60.0bn in FY23, post the commissioning of the projects. We retain our EPS estimates over FY23-25E. At the CMP, the stock is attractively valued at 1.3x FY25E P/B and 9.1x FY25E P/E. We reiterate Buy with a higher TP of INR 98 from INR 66 on increased renewable energy portfolio. We expect forward EPS for F.Y 2023-24 and F.Y 2024-25 to rise towards 3.34 and 4.70 from current EPS of 2.59.