Buy CESC; target of Rs 100: Emkay Global Financial

Emkay Global Financial's research report on CESC

CESC reported Q1FY24 PAT growth of 23% YoY, both at the standalone and consolidated levels. At the standalone level, power demand growth of 7.5%, T&D loss at 7.5% (vs. 9% as allowed) along with high PLF (over 93%) helped in achieving this growth. Merchant prices helped in improving profitability of Dhariwal lnfra (Rs790mn vs. Rs710mn) and Crescent Power (Rs200mn vs. Rs40mn), while Noida continued with increased profitability trend. More importantly, all three Rajasthan DFs have turned positive and reported combined PAT of Rs170mn during the quarter vs. Rs60mn YoY. Over the next few years, improvement in standalone PAT, lower loss levels at DFs, and higher PAT at Noida will all lead to improved consolidated earnings.

Outlook

On account of improving operational and financial metrics, we believe the worst has been factored in and, hence, reiterate our BUY rating, with a Jun-24E TP of Rs100/share. Our bear case value stands at Rs74/share.