CESC’s consolidated profits declined 14.7% yoy to Rs198 cr largely led by a 41% yoy decline in standalone earnings to Rs134 cr

Chirag Batavia • 14 September 2020

CESC Ltd

 In 1QY21, CESC’s consolidated profits declined 14.7% yoy to Rs198 cr largely led by a 41% yoy decline in standalone earnings to Rs134 cr due to the dual impact of Covid-19 and cyclone Amphan in Kolkata even as subsidiaries were lesser impacted.

 Dhariwal unit (subsidiary) reported Profit After Tax of Rs24 cr in 1QFY21, an improvement from losses of Rs24 cr. Improvement in performance was led by 7.4% yoy increase in sales volume to 91.3 crore units as PLF for 1QFY21 increased to 76% (71% in 1QFY20).

 Dhariwal unit has tied up 270 MW of Unit -2 under long term PPA while Unit-1 has signed a PPA (185 MW) with MERC starting November 2019 currently up to October 2020. Haldia unit (subsidiary) reported 12% yoy increase in PAT to Rs85 cr due to 7.2% yoy increase in realizations to Rs5.8/unit.

 Standalone business enjoys very high predictability of cash flows and profitability (>20% Return of Equity). We expect Earnings Per Share (EPS) to grow by 9.9% in FY21 and by 14.8% in FY22. High operating cash flows leads to healthy free cash flow generation.

 Valuations offer increased comfort. We maintain our BUY rating on CESC with a revised Fair Value of Rs820/share, with the results for 1QFY21 further strengthening our investment thesis on 1) stability of regulated business, 2) moderating losses from new distribution circles and 3) improving utilization for Dhariwal.

CESC Ltd: BUY
Dated: 14th September 2020
CMP: Rs.625
Fair Value: Rs.820
Potential Upside: 31.2%
Market Cap: Rs.8,278 Cr
Time Frame: 12 months
Note: The above is a brief note on the company, based on the inputs of KIE research report dated 9th September, 2020, which is available on their website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental.      
Disclaimer: http://bit.ly/2n5AxIE


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