Satluj Jal Vidyut Nigam Limited

CMP – Rs. 40/- share

Target – Rs. 46/- share

Upside – 16%

Founded in 1988, Satluj Jal Vidyut Nigam Limited (SJVN) is a JV of the Government of India and the Government of Himachal Pradesh. It started with a single project and single-state operation to develop India’s largest hydro power station having a capacity of 1,500 MW at Nathpa Jhakri hydropower station in Himachal Pradesh. The company has eight projects, seven generation projects, and one transmission project. SJVN is primarily a hydropower generation company, diversifying into alternative energy sources such as thermal, solar, and wind and into power transmission. The company is currently operating power projects in various states like Himachal Pradesh, Uttarakhand, Bihar, Maharashtra, Uttar Pradesh, Punjab, Gujarat, and Arunachal Pradesh in India and extending reach to neighbouring countries like Nepal and Bhutan.

Let’s explore why “SJVN” is a stock worth investing in

There is ample opportunity for consistent growth in the hydro, renewable, and thermal energy demand. Further, the company has received permission to develop a second hydropower project in Nepal. India’s state-owned company is developing a 900 MW Arun-III hydroelectric project to complete the construction work by 2024.

SJVN is also diversifying into alternative energy sources such as wind & solar energy and Power Transmission and expanding its base in domestic and global markets.

Given the Ministry of Power’s focus on tapping hydroelectric potential in India and Nepal, SJVN is expected to remain strategically crucial for the Government of India.

This status gives it greater operational autonomy and discretion to set up projects up to Rs. 500 crores without express consent from the government. Further, SJVN has a stable revenue stream through long-term PPAs (power purchase agreements) with distribution licensees.

The company has seven generation projects and one transmission project, with eight projects under operation. Further, the company has 16 projects under construction.

These projects worth 39,262.9 MW capacity are under the survey & investigation phase, 4,438 MW under construction & 3,081 MW under the pre-construction phase.

Valuation and Outlook

SJVN is the largest operational hydroelectric power generation facility in India. The Government of India has set an ambitious renewable energy target of 500 GW by 2030. Aligned with the same, SJVN also aims for a renewable energy target of 25,000 MW by CY2030 and 50,000 MW by CY2040. Further, SJVN is planning a CAPEX of around Rs. 45,000 crores over the next 3-4 years, with 16 upcoming projects in the pipeline. The company has already spent Rs. 8,240 crores in FY23, exceeding the GOI target of Rs. 8,000 crores.

We give the stock a “Buy” rating based on the above factors. On the valuation front, we value the company based on 13x of FY24e earnings and arrive at a target price of INR 46 (16% upside from CMP) with a 12 months investment horizon.