CESC’s 1Q results highlight the impact of lower volumes on the S/A business. S/A PAT declined sharply by 38% YoY, resulting in a miss on our estimates (29% miss).
Consol. PAT, on the other hand, declined 15% YoY, partly supported by a better performance at Dhariwal. While a muted power demand environment has impacted profitability in the near term, the longer-term story remains intact. Performances at Dhariwal and distribution franchises (DFs) continue to improve. Despite factoring in the tightening of norms at Haldia and S/A, the stock trades attractively at 7x FY21 P/E. Maintain ‘buy’ with target price of Rs 760/sh.
