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Target: ₹95
CMP: ₹77.45
Q3-FY23 consolidated PAT of CESC declined 3 per cent y-o-y to ₹319 crore as a sharp fall in earnings from Haldia and continued losses at Rajasthan DF offset steady standalone PAT and strong growth from Noida/Crescent Power.
Standalone PAT grew 1 per cent y-o-y to ₹186 crore (18 per cent above our estimate) reflecting low single-digit growth in power sales volumes. Dhariwal Infrastructure’s 9MFY23 revenue/PAT was up 29 per cent/52 per cent y-o-y to ₹1,444 crore/₹166 crore as a rise in power demand and new medium-term PPA led to continued strong PLF.
We maintain a Buy on CESC with an unchanged PT of ₹95 crore, given attractive valuation of 0.9x FY24E P/BV and dividend yield of 5-6 per cent. Turnaround of power distribution businesses could create value.
CESC is a play on the investment and turnaround of the power distribution business, and earnings are expected to gradually improve with a further rise in utilisation at Dhariwal Infrastructure and the potential turnaround of Rajasthan/Malegaon DFs in FY24, while the standalone business is largely stable given regulated RoE model.
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