A public sector undertaking involved in hydroelectric power generation and transmission stock fell by nearly 1.2 percent following the sell rating recommendation by Goldman Sachs.
Share Price Variation
In Wednesday’s trading session, the share price of SJVN (Satluj Jal Vidyut Nigam) Limited reached an intra-day low of Rs.136.9 per share from its previous close of Rs.138.45 apiece, declining around 1.2 percent in the session.
Rationale for the rating
SJVN Ltd., a state-run hydropower company, has received a ‘sell’ rating from Goldman Sachs. This updated target indicates that the stock might decline by 39 percent from its closing price on Tuesday.
The brokerage firm noted that SJVN Ltd. has announced further delays in its 1,320 MW Thermal Power Plant at Buxar. Unit-1 is now expected to be commissioned by the end of the financial year 2025, with Unit-2 scheduled for financial year 2026.
Additionally, although the Arun III project is still slated for commissioning in the third quarter of the financial year 2026, SJVN has not yet finalized any medium- or long-term offtake agreements.
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Financial Overview
SJVN Ltd. is currently grappling with financial challenges. Its stock is trading at 3.84 times its book value and has a high P/E ratio of 58.2, compared to the industry average of 36, indicating potential overvaluation.
The company’s profitability is also a concern, with a return on equity (ROE) of 8.03 percent over the past three years. This marks a decline from 12 percent a decade ago and a further drop to just 6 percent in the last year, reflecting weakening financial performance.
Despite these issues, SJVN reported a notable increase in revenue and net profit for the quarter that ended in June. Revenue from operations rose by 28.9 percent to Rs.870 crore from Rs.675 crore in the same quarter last year.
Net profit increased by 26.6 percent, reaching Rs.357 crore compared to Rs.272 crore previously. However, this growth in revenue and profits was primarily driven by an increase in cash from financing activities rather than from core operating activities.
Shareholding composition
As of June 2024, SJVN’s shareholding pattern shows that Promoters hold the majority 81.85 percent of the shares, wherein the President Of India owns 55 percent and the Government of Himachal Pradesh owns 26.85 percent.
Foreign Institutional Investors (FII) hold 2.4 percent, Domestic Institutional Investors (DII) hold 3.94 percent, and Retail investors hold an 11.83 percent stake in the company.
Company Profile
SJVN Limited is an Indian company specializing in electricity generation, consultancy, and transmission. It produces hydro, wind, and solar power and operates India’s largest hydroelectric power facility, with a total capacity of 1,912 MW.
Written by – Siddesh S Raskar
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