Buy CESC; target of Rs 108: HDFC Securities

HDFC Securities' research report on CESC

CESC’s consolidated PAT in Q3FY23 remained largely flat at INR3.4bn due to lower profit across the Haldia project (under-recovery of O&M and fuel cost) and higher losses across the distribution franchisee (DF) segment. Dhariwal too reported a flat 2% YoY growth in PAT to INR510mn, while standalone PAT came in at INR1.9bn (+1.1% YoY). However, the Noida business reported a strong 103.7% YoY rise in PAT to INR550mn, led by a strong 15% rise in power demand and improved incentives. In the Chandigarh discom, CESC is yet to receive an order from the apex court and, hence, we have not included it in our valuation.

Outlook

We have maintained our earnings estimates for FY23/24 and retain our BUY rating on CESC at a SoTP-based TP of INR108. Our positive stance on CESC is also based on the grounds that the company continues to trade at an attractive valuation of 6.6xFY25P/E and 0.7xFY25 P/BV.

For all recommendations report, click here