CESC Ltd. share price target

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...

The overall industry PLF declined 246 bps YoY to 53.7% (excl. renewables). PLF declined across the Gas and Nuclear segment by 61 bps and 1354 bps YoY respectively. PLF across the Coal and the Hydro was up by 104 bps and 380 bps YoY. While base deficit increased marginally to 0.6% vs 0.5% MoM, peak deficit declined marginally to 0.7% vs. 0.8% MoM. On a YoY basis, both however, improved significantly from 1.6% each respectively. Rates on IEX increased 5.3% MoM to Rs 2.9/unit. In May 2017, net capacity addition was at 1,056 MW against the target of 980 MW....

In our view, CESCs demerger plan will lead to substantial value unlocking. The move would bring with it benefits like (1) Isolation of cash flows of the Power vertical from other businesses (one of the investors? key concerns) and (2) The opportunity to invest in a pure-play power distribution business, with steady cash flows and growth. Losses incurred by Spencers were the key hurdle for this demerger, in our view.

Revenue decreased by 2.96% to Rs. 1572.0 Cr in Q4FY17 when compared to the previous quarter

CESC reported a steady 4QFY17 with flat YoY PAT (Rs 2.95bn), despite the impact of a negative bid on its captive mine. The results were overshadowed by the much-awaited announcement of CESC?s corporate restructuring. The company would now be demerged into four entities, i.e. Discom, Genco, Retail and others.

The overall industry PLF was flat at 43.6%. PLF declined across the Gas and Nuclear segment witnessing a 314 bps and 1378 bps YoY fall respectively. PLF across the Coal and Hydro was up by 130 bps and 180 bps YoY respectively Both base and peak deficit declined to 0.3% and 0.5% respectively in March 2017 vs 0.5% and 0.6% respectively Mo Mie February 2017. Rates on IEX declined 1.6% YoY to Rs 2.6/unit. On a YoY basis, both peak and based deficit improved significantly from 1.6%...