CESC Ltd. share price target

Loss at Dhariwal Infrastructure reduced to Rs. 10 crore in FY2020 as compared to Rs. 93 crore in FY2019. Loss at distribution franchisee shrunk to Rs. 38 crore in FY2020 as compared to Rs. 60 crore in FY2019....

CESC reported a decent operational performance in Q4FY20. Revenues were in line with estimates while lower other expenses led to a beat in EBITDA. However, a shortfall in other income negated the EBITDA beat. Consequently, PAT was marginally lower than estimates. However, on the subsidiaries front, the performance of all generation and distribution...

CESCs 4QFY20 results highlight the benefit of improved performance for its distribution franchisee (DF) and Dhariwal businesses with consol. On the other hand, S/A PAT declined 19% YoY, leading to While the muted power demand environment could impact profitability in the near term, the longer-term story remains intact. Despite factoring in the tightening of norms at Haldia and for the S/A, the stock trades attractively at 7x FY21E In 4QFY20, S/A PAT declined ~19% YoY to INR2.5b (20% below est. Consolidated PAT increased ~7% YoY to INR4.4b in the quarter, largely on the back of improved performance for its DF and Dhariwal businesses. Despite factoring in the tightening of norms at Haldia and for the S/A, the stock trades attractively at 7x FY21E Further, the un-tied generation capacity and scale-up in DFs has the potential to boost earnings.

Q4FY20 earnings are expected to be disappointing in Emkay's power coverage universe. Demand across India fell significantly in the second half of March after the country was locked down to contain the spread of Covid-19. Thus, PLF across stations was impacted, but availability picked up due to improved inventory levels. However, the power ministry's move to provide a moratorium on bill payments is likely to impact discoms' collection efficiency and would stretch its working capital. This is likely to have a cascading impact on the electricity chain of discoms, transmission, gencos and eventually the banks, all of...

Energy sold during Q3FY20, in the standalone business declined 7.7% to 211.9 crore units vs. our estimate of 222.8 crore units while realisation was at | 7.8/kWHR vs. our expectation of 7.5 kWHR. Total generation was down 10.3% YoY at 122.4 crore units. Energy purchased were at 126.7 crore units vs. our estimate of 126.2 crore units. Plant load factor (PLF) of the Budge Budge, southern plants for Q3FY20 were at 69.2%, 26.3%, respectively. Revenues were at | 1648 crore vs. our estimate of | 1659.8 crore, in line with estimates. On the other hand, consolidated revenues came in at | 2344 crore...

Energy sold during Q2FY20, in the standalone business, declined 1.4% at 171.3 crore units vs. our estimate of 182 crore units while realisation was at | 7.7/kWHR vs. our expectation of 7.5 kWHR. Total generation was down 1.9% YoY at 171.3 crore units. Energy purchased was at 165.7 crore units vs. our estimate of 168 crore units. The same has increased YoY by 3.4%....

CESC Limited (CESC) reported strong consolidated Q2FY2020 results with 12.6% y-o-y increase in PAT to Rs. 366 crore, given strong performance of Noida distribution business (132% y-o-y rise in PAT to Rs. 65 crore) and sharp reduction in losses at Dhariwal to Rs. 25 crore (vs. loss of Rs. 63 crore in Q2FY2019). However, standalone performance was muted with marginal 1.5% y-o-y increase in PAT to Rs. 275 crore, given only 1.7% rise in power sales volume. The board of directors has decided not to pursue the demerger of the generation...

PAT was up ~13% YoY to INR3.6b in the quarter on carrying cost recovery at Noida (~INR150-200m). For 1HFY20, PAT was Profits at Noida rose YoY to INR790m (v/s est. INR450m) on favorable order Distribution franchisees net loss was slightly higher YoY at INR30m (v/s est. Crescent and Surya (RE)s PAT was higher YoY at INR170m (v/s est. Dhariwals net loss stood at INR250m. While YoY (INR630m loss in 2QFY19), the loss may appear lower; the company has noted that it is on account of re- classification and possible adjustments in the previous year. Generation at Dhariwal was 14% lower YoY at 504MUs. Dhariwal has signed a PPA with Maharashtra for 170MW supply of power from Nov19 for a one-year period. Untied generation capacity and scale-up of DFs have a potential to boost earnings. The stock trades attractively at ~8x FY21E P/E even as visibility of earnings at Dhariwal and DFs improve, and factoring in the tightening of norms at Haldia and S/A.

CESC Limited's (CESC) standalone Q1FY2020 profit after tax (PAT) rose strongly by 18% y-o-y to Rs. 217 crore led by higher power sales volume (up 8% y-o-y) and improved realization (up 1.2% y-o-y). The company started reporting consolidated financials from Q1FY2020 and consolidated PAT rose by only 9.4% y-o-y to Rs. 232 crore as strong performance from standalone business was partially offset by lower profit contribution from subsidiaries. We believe that CESC is trading at an attractive valuation of 9.1x FY2021E EPS and 0.9x...

Energy sold during Q1FY20, in the standalone business declined 7.6% at 305.7 crore units vs. our estimate of 284.7 crore units while realisation was at | 7.7/Kwhr vs. our expectation of |7.5 Kwhr. Energy purchased was at 177.4 crore units vs. our estimates of 165 crore units. The same has increased YoY by 10.3%. On a plant wise basis, Budge Budge plant generated 157.6 crore units while Southern generated 14.2 crore units for Q1FY20. Hence, total generation was at 171.8 crore units for Q1FY20. On the PLFs side, Budge Budge plant reported 96.2% while southern plant reported...

Standalone (S/A) PAT grew by a healthy ~18% YoY to INR2.2b (our estimate: INR1.9b), led by higher sales (up ~8% YoY to 3.1BU) due to strong demand (likely because of seasonal factors). T&D; losses are estimated to have remained steady at ~9-10%. CESC has started reporting consol. quarterly performance from this quarter. Consol. PAT was up ~9% YoY to INR2.3b in 1QFY20....

CESC Limited's (CESC) standalone business generates steady earnings and cashflow, while we expect its loss-making subsidiary Dhariwal Infrastructure and the Rajasthan distribution franchisee (DF) to pare losses and turn profitable in FY2021/FY2022. We believe that CESC is trading at a reasonable valuation of 9x FY2021E EPS and 0.9x FY2021E book value on a standalone basis. Hence, we maintain our Buy rating on CESC with revised SoTP based price target (PT) of Rs. 905 (increased on account of a higher valuation multiple for...

Energy sold during Q4FY19, in the standalone business declined 4.2% at 229.1 crore units vs. our estimate of 2485 crore units while the realisation was at | 7.25/Kwhr vs. 6.82/Kwhr in Q4FY18. Energy purchased was at 104.3 crore units vs. our estimate of 125.4 crore units. The same has declined 21% YoY. For FY19, power purchase was down at 558.1 crore units vs. 563.7 crore units in FY18. On a plant wise basis, the Budge Budge plant generated 601.5 crore units while southern generated 2.84 crore units for FY19. The company continues to impress on reducing T&D; losses as the same came...

demand off-take of power during FY2019, led to lower generation of power both at Budge Budge unit and Southern unit (down by 0.3% and 6.6% y-o-y respectively). Power purchased also remained lower by 1.0% during the year. This led to 0.4% decline in revenues y-o-y, as realisation also did not support and was lower by 0.8% y-o-y. Though PLF was lower at both...

FY19 consol. adj. PAT grew 43% YoY to INR11.8b (consol. numbers are reported annually) v/s our est. of INR10.1b. The strong performance was driven by sharp reduction in losses at Dhariwal and lower losses in distribution franchisee (DF). Standalone (S/A): PAT grew ~8% YoY to INR9.4b. T&D; losses were lower ~70bp YoY to 9% (down ~260bp in the last three years). Sales were flat at 10.4BU due to weak demand and weather conditions. Capitalization is estimated at INR3.8b, implying regulated equity increase of ~3% YoY in FY19. Haldia: PAT was broadly unchanged at INR3.2b as it continues to benefit from...

CESC reported lower-than-expected Q3FY19 results on account of lower revenues and higher costs, which, in turn, impacted EBITDA. Revenues came in below our estimates at | 1707 crore vs. our estimate of | 1825 crore. Generation was flat YoY while energy sold was down 2% YoY at 229.5 crore units In Q3FY19, power sold at Haldia Energy was 107.4 crore units while Chandrapur plant posted ~100% YoY generation at 88 crore units Absolute EBITDA came in at | 202 crore, significantly below our...

CESC Ventures, which got listed on 25 January 2019. Generation and revenue remained flat; however, EBITDA came in below our expectations due to higher operating expenses and fuel costs. PAT was marginally above our estimate on favorable rate-regulated income. In Q3FY19, PLF improved across the Haldia and Chandrapur plants, driven largely by the festive season which led to a rise in power demand. The Chandrapur plant's case IV PPA with MSPGCL was extended by another 45 days until January 13, 2019. We expect Chandrapur's loss to narrow to Rs1.2bn in FY19 from Rs2.0bn in FY18....

5 February 2019 3QFY19 on account of lower T&D; losses and interest cost. Sales in the Kolkata distribution circle declined 2.1% YoY to 2.3BU, given the strong base (increased 12% YoY in 3Q last year). Revenue was flat YoY at INR17.1b. T&D; losses declined 200bp YoY to 9.8%. Power exports stood at 135MU, as against 212MU in the year-ago period. EBITDA, including rate regulatory item, increased 6% YoY to INR4b (in-line). Depreciation was flat YoY at INR1.1b. Finance cost declined 3% YoY/QoQ to INR1.2b.

7 January 2019 Maharashtra DISCOM recently concluded auction of two distribution circles under the distribution franchisee (DF) model. The license is for 20 years, extendable by 10 years. More than 80% of the energy supply is to industrial/commercial customers. Based on preliminary data, Malegaon circle is equal to CESCs Kota distribution franchisee circle in terms of input energy. The input energy was 677MU and AT&C; losses stood at 47%. The input energy was 677MU and AT&C; losses stood at 47%. The contract is for 20 years, extendable by 10 years. The circle is adjacent to Torrents existing Bhiwandi operations. In terms of input energy, the circle is ~20% of size of its Bhiwandi operations. The winning bidder is selected on the price of input energy it will pay the DISCOM. DF has no role in fixing tariff (it is determined by the regulator for the DISCOMs operating area).

28 December 2018 CESCs power distribution includes Kolkata, Noida (49% stake) and three franchisee (DFs) circles in Rajasthan. The generation portfolio includes installed capacity of ~2.5GW, of which only 300MW is without any long-term PPA. The regulated distribution business of Kolkata and Noida generates a healthy RoE of ~20%. Noida, which is a new circle, has grown at CAGR of ~21% over FY13-18 and we expect ~11% CAGR over FY18-21. The DFs are in the initial years of operation. We expect a meaningful contribution from DFs only after a couple of years. Generation capacity under long-term PPA generates healthy double-digit RoE on the back of efficient operations and favorable norms. CESC, in its new form, reported PAT of ~INR8.3b in FY18, up ~55% YoY, driven by the full benefit of Noida PPA at Dhariwal power plant. PAT is partly dragged by initial losses in the DFs (~INR1.