Feb 21, 2023, 04:05 pm
With a market valuation of ₹9,682.53 Cr, Cesc Ltd is a mid-size company that engages in the power industry. Since 1899, CESC has produced and distributed electricity throughout Kolkata and Howrah, making it the country's first fully integrated electrical utility corporation. The company serves 3.4 million customers, including residential, industrial, and commercial users. It also has a presence in the renewable energy sector thanks to solar power plants in Gujarat and Tamil Nadu with a combined capacity of 27MW. The company is the only electricity distributor in a 567 sq km area that includes Kolkata, Howrah, and surrounding areas.
The company has said in a stock exchange filing that the Board of Directors has “Declared an interim dividend INR 4.50/- per equity share (i.e., 450%) on the paid-up equity share capital of the Company payable to those members whose names appear in the Register of Members of the Company, or, will appear as beneficial owners (as per particulars furnished by the Depositories viz., National Securities Depository Limited and Central Depository Services (India) Limited) at the close of the business on 24 February, 2023, being the Record date to ascertain the eligibility of members to receive the said interim dividend."
During Q3FY23, the company posted revenue from operations of ₹3,129.00 crore on a consolidated basis, up by 10.72% from Rs. 2,826.00 crore in Q3FY22. The net profit of CESC reached Rs. 319.00 crore in the quarter ended December 2022, down by 3.04% from Rs. 329.00 Cr recorded in the quarter ended December 2021. CESC EPS has dropped to Rs. 2.40 in Q3FY23 from Rs. 2.48 in the year-ago quarter.
Post the Q3 earnings of CESC, the brokerage firm HDFC Securities said “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. 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."
“Maintain BUY with an unchanged target price of Rs120. We revise our estimates based on 9MFY23 performance, especially for DFs. The stock is currently trading at 6.7x P/E and 0.9x P/BV on FY24E basis, with a dividend yield of ~7%." said ICICI Securities.
“CESC’s generation and distribution assets in Kolkata remain a cash cow for the company, producing strong cash flows and high ROE. A steady performance at Dhariwal due to the new PPA should continue to broaden earnings visibility and cash generation. This apart, CESC’s dividend yield is high at 6%, and we find current valuations attractive at 0.8x FY25E P/BV. We thus maintain BUY with an unchanged SOTP-based TP of ₹108," said BOB Capital Markets.
The shares of CESC Limited closed today on the NSE at ₹77.45 apiece level. At the current market price the stock is trading at a dividend yield of 5.81%.