Buy CESC, target price Rs 113: HDFC Securities

HDFC Securities has buy call on CESC with a target price of Rs 113. The current market price of CESC Ltd. is Rs 78.
Time period given by analyst is one year when CESC Ltd. price can reach defined target.

CESC Ltd., incorporated in the year 1978, is a Mid Cap company (having a market cap of Rs 10339.45 Crore) operating in Power sector.

CESC Ltd. key Products/Revenue Segments include Electricity and Other Operating Revenue for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 3420.00 Crore, up 5.75 % from last quarter Total Income of Rs 3234.00 Crore and up 13.89 % from last year same quarter Total Income of Rs 3003.00 Crore. Company reported net profit after tax of Rs 445.00 Crore in latest quarter.

Investment Rationale
CESC’s consolidated PAT in Q4FY22 increased marginally by 3.7% YoY to INR4.5bn, as higher earnings in the Noida circle (from higher power demand) were offset by increased losses in the distribution franchisee (DF) business (a loss of INR270mn vs a profit of INR270mn YoY), given penalty waiver in Malegaon circle. Dhariwal profitability was lower due to a higher YoY base (from one-offs recovered in Q4FY21), while standalone PAT declined marginally by 4.1% YoY. The Dhariwal project has signed a three-year medium- term PPA for 210 MW with the Railway Energy Management Company (REMCL). CESC expects to receive a letter of intent (LoI) for the Chandigarh discom in Q1FY23. It has tweaked earnings estimates, based on REMCL PPA with Dhariwal and extending losses in the distribution business. Accordingly, while the brokerage retains BUY rating, as it marginally lowers TP to INR113 (vs INR119 earlier).

Promoter/FII Holdings
Promoters held 52.11 per cent stake in the company as of 31-Mar-2022, while FIIs owned 13.81 per cent, DIIs 20.99 per cent.