Buy CESC; target of Rs 170: Sharekhan

Sharekhan's research report on CESC

Consolidated PAT declined by 7% y-o-y to Rs. 415 crore due to higher operating and depreciation expenses which was compensated by a lower tax rate. Standalone PAT declined 22% y-o-y to Rs. 205 crore because of higher other expenses. Dhariwal Infrastructure/Crescent Power profit increased 22%/100% y-o-y to Rs. 94/24 crore respectively. Aggressive RE growth strategy with a plan of 3GW (capex of ~Rs. 12-13k cr) in the next 4-5 years makes good value proposition given the lower RE cost, strong growth prospects, and likely improvement in ESG rating. Its subsidiary has selected as successful bidder for setting-up of 10,500 TPA of green hydrogen production facility in India.

Outlook

We retain Buy on CESC with a revised PT of Rs. 170. Valuation of 1.5x FY26E P/BV is attractive, and stock offers a healthy dividend yield of ~3-4%. Renewable energy capex revival is going to drive the growth and turnaround of the distribution business would further aid the earnings.

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