Buy CESC: target of Rs 95: Sharekhan

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26 Aug, 2025 12:21

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Sharekhan's research report on CESC

Q4FY2022 consolidated PAT was flat y-o-y at Rs. 424 crore as strong performance of Noida Power gets offset by higher loss at distribution franchise (DF) business amid impact on demand due to COVID-19 third wave. Standalone PAT was steady at Rs. 259 y-o-y (down 4.1% q-o-q) despite weak power sales volume of 2,100 MU (down 5.8% y-o-y) beating our estimate of Rs. 215 crore on higher regulatory income and lower tax rate. Haldia/Dhariwal PAT declined by 21%/10% on weak demand and high base of Q4FY2021, especially for Dhariwal. Dhariwal Infra signed a 210 MW medium-term PPA with Central Railway for three years, which would further aid the profitability of Dhariwal Infra (FY2022 PAT of Rs. 137 crore versus Rs. 106 crore in FY2021). RJ losses to reduce in FY2022 but breakeven timeline extends due to weak demand in Kota. The recent sharp fall in the stock price provides a good entry opportunity and potential scale-up of power distribution (recently won Chandigarh discom) could create long-term value for investors.

Outlook

Hence, we maintain a Buy on CESC with a revised PT of Rs. 95 (lower valuation for standalone and DF valuation), given attractive valuation of 0.9x its FY2024E P/BV and dividend yield of ~6%.

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