SJVN- The Energy Stock

If you are looking for a stock which may not create wealth, which can keep you maintain the positive cash flow, this stock is for you (low PE). SJVN- Satluj Jal Vidyut Nigam Limited a small cap stock and the largest operating hydroelectric power generator producing 1912 MW of power from the hydroelectric plants alone dominating East India along with Gujarat and Uttarkand. Possibly nothing would have surprised you till now.

Promoter

The Chairman, Mng. Director, Director of Finance has been Nand Lal Sharma since 2019, who is both MBA and MSc graduate from renowned universities. The past records say he had played in top influential roles for both State and Central government. No black marks have been found. The man of experience introduced various HR strategies to cut expenses and remodelled the business plan several times.

Year2016-172017-182018-192019-20
No. of employees1686160215791564

The administration is filled with experienced employees who are either from IIT, Civil Servant, MBA graduate had a service of more than 20 to 30 years. The authority is diversified into various fields like Finance, Electrical- Civil- Mechanical or Soil engineer.

The financials are strong, but the revenues never grew so is the profit because the time to build a power producing unit is averaged to 4 to 7 years. The book value has been increasing gradually (₹29.92). The liquidity stays intact, ₹2500-₹3000 crores observed to be a sweet spot for the company. Whenever the cash exceeds, they announce buyback or higher dividend.

The company has set its capacity to double every 7 to 10 years so should the stock.

The debt structure

The asset packed organization has issued dividends for more than 10 years, having a huge positive cash flow for the past 10 years. Debt to equity is no problem (0.19) an edge is the cash is enough to handle the total debt, the company will be out of half its debt in 5 years which also includes an acute amount of foreign loan. The surprising factor is the organization is rated AA and strictly maintains it will be a problem of a 65 bps increase for each notch.

Threats

  • Since the majority stake is owned by the government the dividends are paid only for the benefit of themselves.
  • The price appreciation is no significant compared to growth stocks.
  • Most of the plants are located in Himachal Pradesh and subsidiary operates in Nepal which has a danger of collapsing because of its dormant location.
  • Power generated from solar is 1.45/Kwh, but hydropower plants costs as much as thrice of the former.
  • Land acquisition costs are high and building the plants under the government norms are so restrictive to the growth.

Overcoming threats

  • Since the world is transforming from fossil fuels to renewable kind, once the demand picks up energy stocks witnesses the spikes.
  • The well organized SJVN is building new solar projects and Wind Mill farms.
  • Power transformation is one of its subsidiaries does which makes SJVN a power pack.
  • Apart from lighting the city it helps other companies in building their business.
  • Debts are decreasing and the cash is enough to service debts.

The revenues may stay low for a while, the capital work in progress is high with projects lined up, with inventories showing movement of goods rapidly.

The stock is a moderate buy and hold for long-term.

The list of working and operating projects from 2020-21 annual report.

Long term Projects, Long term hold

1 Comment

Comments are closed.