Recommendation From Power Generation and Distribution Sector

HERE IS WHY

Positive demand outlook
Appreciating financial performance
Increasing projects' portfolio

SJVN Limited

POWER YOUR PORTFOLIO GROWTH WITH SJVN

SJVN Limited is a joint venture of the Government of India (GOI) and the Government of Himachal Pradesh (GOHP).The Govt. of India and Govt. of Himachal Pradesh hold 61.93 per cent and 26.85 per cent of shares in SJVN, respectively. SJVN operates its business by generating thermal power, hydro power, wind power and solar power. It also entered in the business of power transmission as well as consultancy of hydro power projects.

On the consolidated financial front, the total income from operations rose by 19 per cent to Rs. 2654.05 crore in FY19 from Rs. 2228.50 crore in FY18. The EBITDA grew by 20.48 per cent to Rs. 2032.3 crore in FY19 from 1686.84 crore in FY18. EBITDA margin stood at 76.57 per cent in FY19 as against 75.69 per cent in FY18. Net profit climbed 11.6 per cent to Rs. 1366.56 crore in FY19 from Rs. 1224.61 crore in FY18 due to increased sales of RHPS plant (hydro power) and wind power plant (Sadla and Khirevire).

SJVN posted positive results for the June quarter of FY20. On the consolidated financial front, the income from operations appreciated by 18 per cent on a YoY basis. In Q1FY20, the company posted Rs. 724.49 crore as income from operations as against Rs. 614.22 crore in Q1FY19. The EBITDA grew by 25 per cent to Rs. 577.49 crore in Q1FY20 from 462.09 crore in Q1FY19. Net profit climbed 43.54 per cent to Rs. 294.35 crore in Q1FY20 from Rs. 1224.61 crore in Q1FY19 due to decrease in finance cost as well as depreciation and amortisation expenses. 

SJVN Limited was conferred with "Mini Ratna: Category-I" status by the Government of India and also upgraded as schedule 'A' PSU in the year 2008. SJVN has two fully-owned subsidiaries, namely, SJVN Arun -3 Power Development Company Pvt. Ltd. (SAPDC) and SJVN Thermal Private Limited (STPL) . SAPDC is situated in Nepal and STPL is situated in Bihar. Along with that, SJVN entered in joint ventures with Cross Border Power Transmission Company Limited (CPTC) to construct 86 km long transmission line and with Kholongchhu Hydro Energy Limited to execute hydro electric project in Bhutan. There are four projects under construction, three projects under pre-construction stage with investment approval and four projects under investigation stage.

The government is on its way to achieving 175 GW target for installed renewable energy capacity by 2022. India has attained 4th and 6th global position in wind and solar power installed capacity. The growing urbanisation, increased focus on infrastructure development and rising per capita energy consumption will all cause the nation's energy demand to rise. In the near future, the demand for energy will increase, which will support the financial growth of SJVN.

The stock is available at 3.8 times of price-to-earning (FY19) with dividend yield of 7.7%. By virtue of these factors, we recommend our reader-investors to BUY this stock.