CESC Ltd. share price target

BUY CESC Ltd between Rs. 627 - 565 for the target of Rs 685.

mainly due to commissioning of Chandrapur plant. Raw material expenditure stood at 23% of net sales on account of high operational efficiency during the quarter. Depreciation stood at `960mn (+5.5% q/q;-3% 3%% y/y) .Interest expense stood at...

CESC reported better-than-expected Q1FY17 results on the back of higher-than-expected sales and lower finance costs. Net sales came in at | 1888 crore as per the new Ind AS. This is higher compared to estimates of | 1805 crore. The higher-than-expected revenues can be attributed to higher purchase of power from its subsidiary Haldia Energy. CECS’s own generation was down 7.8% YoY while power purchase went up 36% YoY .Reported absolute EBITDA came in at | 387 crore vs. our estimate of | 377 crore. This was on the back of lower other expenses despite the fact that power purchase was at | 684 crore vs. our estimate of | 570.1 crore. Higher-than-expected revenues and EBITDA led PAT to come in at | 174 crore vs. our estimate of | 167 crore.

Valuation : However, factoring in the two scenarios of recovery and non-recovery of | 230 crore annual loss (for negative bidding of | 470/tonne) we have valued CESC on both base and bear scenario by assigning an equal weightage to both cases. Accordingly, we assign a 80% weightage to the base case and 20% to the bear case valuation to arrive at an SOTP revised target price of | 645 for CESC (earlier | 623). However, the price has run up from our last update. Hence, we downgrade the stock from BUY to HOLD recommendation

Post their BUY recommendation in April 2016, CESC’s stock has moved up 24%. We retain faith owing to strong earnings outlook (all the businesses on an upward trajectory). While the Haldia ramp-up has led to 85%YoY consolidated earnings growth in FY16, substantial reduction of losses in Chandrapur will drive earnings CAGR of 58% over FY16-18E (79/39%YoY growth in FY17/18E), leading to RoE expansion from 7% to 13% over FY16-18E. HDFC Securities increase SOTP-based TP to Rs 685 (implied valuation of 1.2x P/B FY18E) from Rs 637 by factoring in (1) Better-than-expected performance of regulated operations (Parent + Haldia), (2) Trends from the 2015-16 annual report, and (3) Current valuations of FSL. CESC is currently trading at a reasonable valuation of 1.1x P/B FY18E.

Trendlyne has 6 reports on CESC updated in the last year from 3 brokers with an average target of Rs 654. Broker has a rating for CESC with 2 price downgrades and 2 price upgrades in past 6 months.

CESC's net profit has increased by 1.6% yoy to Rs2.48bn v/s our estimate of Rs 1.9bn in 4QFY16 while the Company's revenue surged 4.4% during the quarter notwithstanding lower generation by standalone plants (down 22% yoy) on account of higher power purchased (up 77% yoy) from its subsidiary plant. As the stock price has gained by 25% in last 3 months mainly on account of signing of Power Purchase Agreement (PPA) with TN Generation & Distribution Corporation (TANGEDCO) & Noida State Electricity Board (SEB), we have revised our recommendations from BUY to ACCUMULATE with an upwardly revised Target Price of Rs620....

EBITDA increased 6% YoY to | 462 crore vs. our estimate of | 419 crore. Key reason for the same was a decline in fuel cost, which was down 52% YoY at | 152 crore (vs. I-direct estimate of | 257 crore)....

CESC, the flagship company of the RP-Sanjiv Goenka Group, is engaged in the generation and distribution of electricity spread across 567 sq km of licensed area in Kolkata it caters to domestic, industrial and commercial users. Currently, on a standalone basis, CESC owns and operates three thermal power plants generating 1,125 MW power- Budge Budge generating station (750 MW), Southern generating station (135 MW) and Titagarh generating station (240 MW). On a consolidated basis, CESC owns a total capacity of 2325 MW. It added 1200 MW capacity (viz. 600 MW Chandrapur plant - Dhariwal Infrastructure and 600 MW Haldia project) to its standalone capacity in FY15. More than 80% of its customer's electricity...

We reinstate coverage on CESC with a BUY. Concerns about IPL (the stock has corrected ~17% since the bid) and the loss-making Spencer?s Retail are priced in, but CMP does not factor in two key developments: (1) An FSA with Coal India in Mar-16 for the Chandrapur project (supply of coal from SECL has started in Apr-16), and (2) In-principle nod by the UPERC in Jan-16 for a long-term PPA to supply 187MW power to Noida Power Company Ltd (NPCL).

CESC reported net profit of Rs1.12bn, up 0.9% yoy (in line with our estimate of Rs1.12bn) in 3QFY16. CESC put up a good show in revenue which came in high 23.1% yoy due to greater number of units sold (up 13.9% yoy) and higher realizations (up 8.0% yoy). In the past, cancellation of captive mine, Sarisatolli coal block had impacted the CESC share price. However, at current price, the stock is trading at 0.6x FY18E BV, which in our view is attractively valued mainly on account of commissioning of plants, improvement in retail business showing positive EBITDA at the store levels and better operating...