CESC has target of Rs 310: Aashish Tater

CESC has target of Rs 310, says Aashish Tater, Fort Share Broking.

Tater told CNBC-TV18, "CESC is one stock which I feel is tremendously undervalued when I see its standalone results. Now what is the problem with the entire CESC is they also have a subsidiary in the form of its retail space Spencer's which is actually draining out the profit of CESC."
He further added, "Right now there was a ruling by west Bengal Electricity Regulatory Commission, which allowed the company to raise its tariff hike and will assure that the company will get a return on equity of close to 15.5% for this year and next year it will be roughly around 16.2%. So the company by FY13 would return to a bottom line of around Rs 488-500 crore which was roughly around that FY10 levels. So on Rs 500 crore of profits on standalone results the company current market cap is Rs 3150 crore."
"Get me a company where you have got this quality and assured business at a PE multiple of less that 6.5 times. The problem here is Spencer's but what has happened to the Pantaloon deal we feel there will be a strategic move even from Mr. Goenka and they would either hive off this particular asset into a separate subsidiary and will demerge the operations of CESC. If they do not do what will happen is that over a period of time Spencer's will not take that much of cash from the balance sheet but would able to survive on its own."
"We feel by FY14 the operating losses would be muted to next to zero levels. So if someone has got a perspective of even 2 years they will be definitely rewarded to close to Rs 400 but we have a target of Rs 310 for this year and Rs 400 for next year."
"We feel this is one stock which is a portfolio bet over a longer timeframe. Now even we will be raising an issue on Spencer's because this is actually a problem for the company and the standalone results have been marvelous and with the recent ruling the stock will again return to that old era of profit of approximately Rs 500 crore. This is definitely bet from a longer term frame and at Rs 240-250 levels we do not see much of a downside but almost an upside of 60-70% in next 2 years time frame." Disclosure: Safe to assume stocks are recommended to clients but no personal position.