Buy CESC; target of Rs 825: Sharekhan

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Sharekhan's research repor on CESC

Standalone earnings to recover from Q2FY21 as power demand improves; turnaround of subsidiaries to improve consolidated earnings. Standalone PAT fell 38.2% y-o-y to Rs. 134 crore, below our estimate due to lower PLF-based incentive income as volumes fell 31% y-o-y. Better performance of subsidiaries stemmed decline in consolidated PAT at 15% to Rs198 crore. Performance of Dhariwal Infrastructure improved y-o-y with PAT of Rs. 24 crore versus net loss of Rs. 24 crore in Q1FY20, while loss at distribution franchisee declined to Rs. 33 crore versus net loss of Rs. 53 crore in Q1FY20. Potential singing of medium/long-term PPA in FY2022E for Unit-1 of Dhariwal Infrastructure could act as a key re-rating trigger for CESC.

Outlook

Retain Buy on CESC with an unchanged SoTP-based PT of Rs. 825 as valuation is attractive at 0.7x FY22E P/BV.

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