SJVN Ltd - Growth set to surge | Company Update
We upgrade SJVN to Buy and raise Target Price to Rs 110 (from Rs 102) due to valuation rollover. H2-FY26 is poised for a step-up with expected full commissioning of Buxar TPP, Bikaner SPP, and select other solar projects, driving capacity to ~5.0 GW (vs 3.1 GW currently). Its other under-construction projects should keep the growth momentum high for the next 2 years as well. The company is now more focused on execution rather than aggressive ramp up of their pipeline portfolio. Sector fundamentals remain supportive, with SJVN playing a strategic role in the GoI’s renewable energy ambitions. We have kept our estimates unchanged and project revenue, EBITDA, and PAT to grow at a CAGR of ~55% over FY25-FY28E, underpinned by capacity additions.
Higher installed capacity but lower plant availability:
Q2FY26 revenue of Rs 10,324 was flat YoY, and 1HFY26 revenue of Rs 19,499 mn was up 3 % YoY. Total installed capacity rose to 3,147 MW, up 28% YoY, but power generated for 1HFY26 was up by only 6.3% YoY. EBITDA margin was 260 bps YoY, but PAT was down by 28% YoY due to higher depreciation and finance costs. Usually, Q2 is a cyclically strong quarter for the hydropower generation in India but this time around the extended monsoon period led to high silt deposition which required more operational maintenance culminating into lower plant availability factor. Additionally, capacity utilization of solar power plants would also have been cyclically low during this period. Capacity utilization for H1FY26 was 69% vs H1FY25’s 82%.
Update on near-term projects:
Buxar Unit 1 (660 MW, TPP) trial test is successfully done and will soon get commissioned while Unit 2 (660 MW, TPP) will see commissioning in another 2-3 months. Full commissioning of Bikaner SPP (total 1000 MW, of which 320 MW is under construction) is expected by Q3/Q4 FY26 while Arun III (900 MW, HEP) construction is on track for completion by Q3 FY27. Including Buxar unit 2, the total capacity under construction as of Q2 end is 5,091 MW versus current installed capacity of 3,147 MW (63% hydro and 37% solar and wind). We have assumed a year end installed capacity of 5.0 GW and 7.5 GW by FY26 / FY27, respectively. These do not include the 3 HPP projects which are currently in conflict with GoHP, viz., Luhri (210 MW), Dhaulasidh (66 MW), and Sunni (382 MW).
Valuation and Rating:
Our TP is derived using an average of indicative fair value applying a 15.0x P/E and 10.0x EV/EBITDA (unchanged) in-line with NHPC’s forward valuations. Applying these multiples to our September 2027E EPS and EBITDA, we arrive at a TP of Rs 110, implied upside of 31%. We have moved our rating to Buy from Accumulate reflecting step up in growth and operating leverage going forward. Downside risks to our target price may emanate from a further delay in project completions.
Company website: https://sjvn.nic.in/
| Rating | BUY |
|---|---|
| CMP | INR 84 |
| Target Price | INR 110 |
| Upside | 31% |
Click to download the full SJVN Ltd Company Update
Analyst:
- Mohit Surana - Senior Research Analyst, Institutional Equities (NISM-202300189881)
- Mohd Haris - Research Associate, Institutional Equities (NISM-202400161268)
Frequently Asked Questions (FAQ)
1. What is the current investment rating and target price for SJVN?
SJVN has been upgraded to a BUY rating with a revised target price of Rs 110, implying an upside of 31% from the current market price of Rs 84.
2. What is driving the positive outlook for SJVN?
The positive outlook is driven by expected full commissioning of key thermal and solar projects, which is likely to increase installed capacity and support strong growth over the next two years.
3. How much installed capacity does SJVN currently have?
As of Q2FY26, SJVN’s installed capacity stood at 3,147 MW, comprising 63% hydro and 37% solar and wind power.
4. What capacity additions are expected in the near term?
Capacity is expected to rise to approximately 5.0 GW by FY26 and 7.5 GW by FY27, supported by commissioning of thermal, solar, and hydro projects under construction.
5. Why was revenue growth muted in Q2FY26 despite higher capacity?
Revenue growth was impacted by lower plant availability due to extended monsoon conditions, higher silt deposition affecting hydropower plants, and seasonally lower solar plant utilization.
6. How did profitability trend during Q2FY26?
While EBITDA margins improved year-on-year, PAT declined due to higher depreciation and finance costs associated with recent capacity additions.
7. What is the status of key upcoming projects?
Buxar Unit 1 has completed trial testing and is expected to be commissioned soon, while Unit 2 is likely to follow within 2–3 months. Full commissioning of Bikaner Solar Power Project is expected by Q3/Q4 FY26, and Arun III hydro project is targeted for completion by Q3 FY27.
8. How much capacity is currently under construction?
As of Q2FY26 end, total capacity under construction stood at 5,091 MW, which is significantly higher than the current installed base.
9. Are there any projects excluded from the capacity estimates?
The capacity estimates exclude three hydro power projects—Luhri, Dhaulasidh, and Sunni—which are currently in conflict with the Government of Himachal Pradesh.
10. How is the target price for SJVN derived?
The target price is based on an average of indicative fair values using valuation multiples of 15.0x P/E and 10.0x EV/EBITDA, in line with comparable sector valuations.
11. What are the key risks highlighted for SJVN?
The primary downside risk to the outlook is further delay in project commissioning, which could affect capacity ramp-up and financial performance.
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