Jaiprakash Power (NSE: JP POWER) has displayed an impeccable performance rising by over 350% from its 52 Week low of ₹5.15 to making a high of ₹24 in less than a year. Outperforming the Nifty 50 index by multiple folds, JP POWER has raised its investors’ confidence about the power sector which was once hated by a lot of investors.
In the last three weeks itself, JP Power has risen by 48% and is now experiencing some profit booking as it reached its previous resistance of ₹25. However, the selling pressure doesn’t seem to be strong enough, and shares of JP POWER can be seen trading in a small range.
JP Power is now about 16% down from its short term high of ₹24, and is now trading at ₹20.90. As the Indian Power sector experiences a positive trend in recent months, will this bullish trend in JP Power continue?
How is JP Power's current market price justified by its underlying value?
JP Power’s fair price is ₹32 if we calculate it using a financial valuation model like Discounted Cash Flow (DCF). The company is almost 36% underpriced based on DCF. Another factor to assess JaiPrakash Power Ventures valuation is its PE ratio. Its PE ratio is at 36x which is lower than its 1 year median PE of 74x.
This means JP Power is trading at a discounted rate than it was trading 1 year ago when compared with its earnings. The stock was once trading at a price of ₹143 and now down to ₹20, discount of almost 83%. On paper, JP Power is relatively undervalued. However, a low price does not always mean it’s a discount. Stocks can be valued as ‘expensive’ even if they are trading at lower prices.
Will JP Power Regain Its Previous Highs?
As we look at JP Power’s potential to bounce back to its former glory days, their latest financial report gives us hope to be optimistic. Despite facing some tough times in the past, reflected by a low Price-to-Sales ratio, the recent quarters have been a turn around for JP Power.
From December 2022 to December 2023, the JP Power’s net sales skyrocketed to an impressive ₹2,190.32 crore. Improving sales and rising awareness for renewable energies like hydropower, we can expect even better from the company in days to come. In the same period, the company also improved its profits.
Coal shortages have been a major challenge for Indian power companies. But increased domestic coal production and imports have helped JP Power to perform better financially. If these factors continue to support, the company can be expected to perform better consistently.
Its important to keep an eye on JP Powers PS ratio as increase in price will only be supported by investors if its sales increases too.
JP POWER's sales growth over the years
| Time Period | Growth Rate |
|---|---|
| 1 YEAR | 25.13% |
| 3 YEAR | 20.79% |
| 5 YEAR | 11.34% |
Profit growth for JP POWER over years
| Time Period | Growth Rate |
|---|---|
| 1 YEAR | -45.6% |
| 3 YEAR | 26.34% |
| 5 YEAR | 16.13% |
JP Power shareholders details
| Category | Percentage |
|---|---|
| Public | 50.4% |
| Promoters | 24% |
| DII (Domestic Institutional Investors) | 20.46% |
| FII (Foreign Institutional Investors) | 5.14% |
Words to end with JP Power
While financial year 2023 was a turn around for JP Power, long term investors must keep a check on its sales. Its current price seems reasonably accepted by investors as it tends to hold near current levels with buyers re-entering as soon as the share hits lower levels.
As the demand for energy has seen a trenmendous shift, power company will likely benefit from this growing demand. But, holding a company just because it exists is not a smart choice. Growth will follow as the company gets more orders for its products.
