Goldman Sachs downgrades SJVN from Buy to Sell, targets ₹65 on overvaluation risks

Goldman Sachs has given hydroelectric power producer SJVN a double downgrade to ‘sell’ from ‘buy’ with a target price of ₹65.

A report by the brokerage firm says that the stock has risen 110% since its initiation in July 2023 and now the valuation risk-reward has turned unfavorable trading above the bull case scenario.

Additionally, Goldman believes that the Street is not yet pricing in the delays in commissioning of Buxar and Arun-III which will further dampen the earnings going forward. So, there is an earnings risk as well going forward for SJVN.

Also, while the Renewable Energy Implementation Agency (REIA) can add at least 3-10% to the target price, that's also expected to have a negative impact on the balance sheet.

SJVN, a joint venture between the central and Himachal Pradesh state governments, has developed projects in regions like Himachal Pradesh and Uttarakhand as well as in neighbouring countries such as Nepal and Bhutan.

On November 9, SJVN reported a 1.3% year-on-year (YoY) decline in net profit to ₹439.6 crore for the second quarter versus a net profit of ₹445.4 crore last year.

The company's shares have gained close to 166% year-to-date.