Analyst corner: Maintain ‘buy’ on CESC with revised TP of Rs 880
CESC‘s Q1FY20 standalone operating performance broadly met ours and consensus estimates. Key highlights, standalone power sales rose 7% YoY to 3.0BU; Rajasthan’s distribu-tion franchise (DF) operations were below expectation as aggregate losses remained flattish at Rs 530 mn with Kota continuing to face some challenges; and Dhariwal losses maintained at Rs 240 mn. Tie-up of open capacity for Unit-1 at Dhariwal remains a key monitorable. CESC, in our view, is well positioned to capitalise on the emerging distribution franchise opportunity while generating a healthy FCF (INR10bn plus) from its regulated business. Maintain ‘BUY’ with revised SOTP-based target price of Rs 880 (Rs 840 earlier) as we roll forward the valuation to Dec-2020.
Standalone generation in Q1FY20 was flattish at 1,718MU (1,709MU in Q1FY19) with Budge-Budge and Southern stations recording 96.2% and 48.0% PLF, respectively. Overall sales inched up 8% YoY to 3.0BU with higher proportion of power purchase units.
