CESC has drawn sharp analyst interest since its demerger plan announcement, which brokers estimate will lead to "substantial value unlocking" from its various businesses. Given the business recovery in recent quarters, analysts including HDFC Securities and Motilal Oswal expect the firm's share price to cross Rs. 1,000 in the coming quarters, with HDFCSec estimating a target price of Rs. 1170+.
The company's pure play power distribution business for instance, is set to expand. CESC’s distribution entity is set to be housed in five cities - the metros of Kolkata and Noida, as well as three new franchises in Rajasthan - Kota, Bharatpur and Bikaner. In addition to it being a pure play power distribution business, this entity would also have attributes of steady cash flows and growth, and CESC expects the new franchises to be profitable within 18 months.
The company's power generation business, which will consist of plants at Kolkata (1,125 MW), Haldia (600MW) and Chandrapur (600MW) is expected to be fully sustainable in terms of cash flow in twelve months, after the resolution at the Chandrapur plant. Profits are likely to happen after that timeframe in FY19.
The retail business is likely to give a profit bump in the next two financial years. Spencer's has reached cash breakeven in FY17. The company's variable rent model has allowed faster store level breakeven compared to the industry average. With accumulated losses having meant no taxes added to the balance sheet, Spencer's may see profits by FY20.