JSW Energy's (JSWEL) Q2 FY11 results are significantly lower than our estimate. This was on account of lower short term realizations, lower sales and higher fuel cost. Net generation was lower due to 1) annual maintenance and 2) higher auxiliary consumption. We reduce our FY11 estimates to reflect delays in capacity addition and higher fuel cost. Re-iterate SELL with a reduced target price of Rs112/share.

Higher auxiliary consumption and maintenance shutdown hampers net generation

Lower realisations and higher fuel cost impact margins

VALUTIONS AND RECOMMENDATION JSWEL management indicated at delays in capacity addition during the year, with two units of 135MW at Raj West and one unit of 300MW at Ratnagiri expected to commission in FY12. We build in higher purchase of spot coal during the year. As a result, our FY11 and FY12 estimates are lower by 21% and 5% respectively. We downgrade our target price to Rs112/share, re-iterate SELL.