Sharekhan's research report on CESC
CESC’s consolidated PAT increased by 1.4% y-o-y to Rs. 353 crore with good performance in Haldia and Dhariwal but it was dragged down by the standalone business and Malegaon DF. Standalone PAT fell 5% y-o-y to Rs. 218 crore due to increase in interest expenses. Dhariwal Infrastructure/Haldia energy profit increased 19%/12% y-o-y to Rs. 81/74 crore respectively with higher generation while Malegaon losses increased to Rs. 43 crore from Rs. 28 crore last year. Aggressive RE growth strategy with a plan of 3.2GW (capex of ~Rs. 12-13k cr) addition in the next 4-5 years is a good value proposition given the lower RE cost and strong growth prospects. Its subsidiary has been selected as successful bidder for setting-up of 10,500 tonnes per annum of green hydrogen production facility. Company has implemented a 5.7% tariff hike for recovery of fuel and power purchase adjustment surcharge from Q1.
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Outlook
We retain Buy on CESC with an revised PT of Rs. 217 on a SOTP basis. Renewable energy capex is going to drive the growth and turnaround of the distribution business would further aid the earnings.
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