Shares of CESC Limited surged over 8 percent on August 27 to hit an all-time high of Rs 206.27 on NSE after several brokerages shared bullish calls on the power utility stock. Investec remains positive on power stocks including CESC, NTPC and Inox Wind, citing strong power demand and a positive earnings outlook.
Power generation saw an 8.3 percent year-on-year (YoY) increase in July, driven by robust power demand. This surge led to a higher plant load factor (PLF) for coal, gas, nuclear, and renewable energy segments, said Investec in a recent note.
Additionally, coal dispatches to the power sector increased by 25.7 percent YoY, reaching 65.5 metric tonnes. The brokerage expects healthy earnings growth for power companies like CESC, given all these factors.
Elara Capital, which interacted with CESC's management recently during the Sanjiv Goenka Group Investor Day, also has a buy rating on the stock with a target price of Rs 228 per share.
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In the brokerage's view, CESC is attractively positioned, given steady and low-risk earnings from regulated standalone operations at Kolkata and Haldia distribution businesses, and options value of incremental earnings from the distribution franchisee in Rajasthan with a strong balance sheet.
Additionally, the company's plans to invest in 3GW of RE assets, and set up a 10,500-tonne annual green hydrogen production facility also bode well for the performance. "We see substantial rerating potential for the stock post the commissioning of 3GW renewable energy capacity," said Elara Capital.
At 12:34 pm, CESC stock was trading over 8 percent higher at Rs 204. 30 on the National Stock Exchange (NSE). So far this year, the stock has rallied around 50 percent, beating benchmark Nifty's returns of around 14 percent during this period.
In the last 12 months, the counter has zoomed 150 percent, more than doubling investors' capital. In comparison, Nifty delivered returns of around 27 percent during this period.
Technical view
Axis Securities has picked CESC as one of the stocks for near-term gains based on technical cheats. The stock is trending within a medium-term rising channel, recently finding support at the lower band and now advancing towards the upper band, indicating a continued uptrend.
The stock has confirmed a breakout above the small descending triangle pattern at Rs 180 levels within a rising channel on the weekly chart, indicating the continuation of the medium-term uptrend, the brokerage said.
Also Read | Investec bullish on NTPC, CESC, Inox Wind on healthy power demand, positive outlook
CESC stock took support at the 38 percent Fibonacci retracement level of a rally from Rs 122-193 positioned at Rs 166 confirming a medium-term support base. The weekly RSI strength indicator's crossover above its reference line has generated a buy signal, said Axis Securities, adding that this indicates an upside to Rs 209-216 levels, keeping the stop loss at Rs 170.
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