Buy CESC target of Rs 825: Sharekhan

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Sharekhan's research report on CESC

Valuation is attractive at 0.7x FY22E P/BV and 7.9x its FY22E EPS. Potential reduction in losses at distribution franchisee and Dhariwal keeps us constructive on stock. Q4FY20 consolidated PAT rose 7% y-o-y to Rs. 439 crore given lower loss at distribution franchisee and higher profit at Dhariwal. Standalone PAT declined by 19% y-o-y to Rs. 250 crore led by an 8% y-o-y fall in power sales volume. Loss at distribution franchisee shrunk to Rs. 38 crore in FY2020 as compared to Rs. 60 crore in FY2019. Short-term PPA for 185 MW with Maharashtra for unit-1 of Dhariwal extended till October 2020.

Outlook

We maintain our Buy rating on CESC with a revised SoTP-based PT of Rs. 825.

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