CESC Ltd. share price target

ICICI Securities Ltd | Retail Equity Research CESC reported lower-than-expected Q4FY18 results on account of lower revenues, which, in turn, impacted EBITDA and profitability. Generation in the base business was up 20% YoY at 150.6 crore units, in line with estimates. However, units sold at 239.3 crore units was below estimates of 265.3 crore units. The key reason was the lower-than-expected sale of power from the subsidiary During FY18, power sold at Haldia Energy was up 12.5% at 414.7...

We expect the Distribution entity to generate PAT of ~INR6.5b in FY18, increasing to ~INR7.5b by FY20, driven by growth in regulated businesses and improvement in franchisees. The Generation business should generate PAT of ~INR4b in FY18, increasing to ~INR5.5b by FY20 on lower losses at Dhariwal. On peer valuation basis, the Distribution business could be valued at INR90b-110b and Generation business at INR50b-60b. Both businesses should generate strong double-digit core RoE and healthy FCF. The combined estimated value of the two demerged entities (INR140b-170b) is greater than the current market capitalization of CESC

CESC Ltd. formerly known as Calcutta Electric Supply Corporation, incorporated in 1978 is the Kolkata-based flagship company of the RP-Sanjiv Goenka Group. It is a fully integrated power utility company with its operation spanning the entire value chain: right from mining coal, generating power and distribution of power across 567 sq. Kms of its licensed area in Kolkata and Howrah, West Bengal. CESC's diversified segments include Power, which is engaged in generation and distribution of electricity; Retail, which includes organized retailing; Property, which is engaged in property development, and Processing Outsourcing, which includes business process outsourcing. Company owns and operates three thermal...

In line with our estimate, CESC's net profit grew by a muted 1.3% YoY to Rs1.5bn in 3QFY18, led by delay in tariff order for FY18, which we expect to be notified in 4QFY18. Its revenue grew by 5.3% YoY to Rs17.1bn, while EBITDA remained flat at Rs3.1bn. The proposed demerger has been approved by the shareholders, and the Company expects the approval of National Company Law Tribunal (NCLT) by Mar'18, while the listing of all the four entities is likely by Jun'18. The valuations seem to have discounted all positives, in our view. Rolling over our estimates to...

ICICI Securities Ltd | Retail Equity Research CESC reported lower-than-expected Q3FY18 results mainly led by lower-than-expected revenues on account of lower energy sold at 234.5 crore units vs. our estimate of 253 crore units. The standalone generation was higher than our estimate at 135.7 crore units while purchase of electricity from subsidiary got impacted During Q3FY18, Haldia TPP operated at PLF of 87.1% and supplied 105.6 crore units to CESC licensed area, which was down QoQ. In the...

Dhariwal is L1 to supply 185MW (net) to Maharashtra (MH) at INR2.76/kWh during December 2017 to June 2018. The contract is part of the flexible coal scheme (report link) under which coal will be supplied by MH at Coal India's notified price. We estimate contribution margin of INR0.7-0.8/kWh. Dhariwal will supply the power from its second unit of 300MW (2x300MW plant). Though the margin is low, the strategy partially de-risks it from the volatile merchant market. Moreover, Dhariwal can now look to supply in day-ahead market from the remaining 115MW capacity, given that operation of part of the unit is now assured. MH could extend...

CESC's net profit grew by 2.1% YoY to Rs2.5bn in 2QFY18, in line with our estimate. Led by 3.1% YoY rise in realisations, its revenue rose by 3.6% YoY to Rs20.8bn, which was offset by higher power purchase cost and other expenses (+38.3% YoY). The proposed demerger of distinct business verticals into 4 separate entities augurs well for CESC, as the past diversification into unrelated businesses was the key overhang for the stock. As the valuations seem to have discounted all positives, we maintain our HOLD recommendation on the stock with a revised Target Price of Rs964 (from Rs903 earlier). Higher Operating Cost Drags EBITDA...

CESC reported lower than expected Q2FY18 results mainly led lower than expected revenues and higher other expenses which lead to lower profitability. Adjusting for one off to the tune of |25 crore, PAT...

CESC's standalone PAT grew 2.1% YoY to INR2.47b, marginally below estimate. T&D; loss (provisional) declined 100bp YoY (30bp QoQ) to 10.8%. Sales grew 4% YoY to 2.75BU. Realization was up 2.8% YoY to INR7.57/kWh. The tariff for FY18 is pending regulatory approval, delaying cost and capex recovery. However, this was offset by impressive reduction in T&D; losses (drives incentive income) and power exports. Spencer sales down, but EBITDA positive on efficiency gains: Average sales declined 5% while same-store sales declined 1% YoY, as it continues to face...

ventures (First source, Property, FMCG). The listing of various entities will 10.1 happen post October 2017. Existing shareholders will be entitled to one 14.1 share of each business demerged for one share held in the pre demerger entity. This would lead to elimination of holding company discount and allow discovery of true worth of all the businesses, which we believe is...