Q3FY20 Result highlights
Key positives: T&D losses at 9.0% in 9mFY20; Tie up of 190MW of Dhariwal under tolling arrangement with state utilities at Rs2.89/unit
Key negatives: Delay in tariff order and setting of norms for FY19-20E time period;
Impact on financials: Maintain our earnings estimates; introduce our FY22E estimates
Valuations & view
CESC’s operational performance in Kolkata License area (KLA) has been exemplary over years. Especially, T& D losses and PLF has been superior to benchmark in KLA, thus enabling a superior return profile from KLA. Besides, the decline in T&D losses in DF businesses bodes well for return from DF businesses. Moreover, Dhariwal’s tie up of 300MW under long term and new tolling arrangements for 190MW will reduce the losses for the plant in FY2oE/FY21E. CESC trades attractively at 8xFY20E earnings. Reiterate outperformer with a SOTP based target of Rs868/share
CESC is engaged in the business of generation and distribution of electricity within the licensed area of 567 sq. km in the city of Kolkata and adjoining areas and does not operate in any other reportable segment. The peak power demand in the licence area is now approximately 1,460 MW, which is met through CESC's internal generation capacities as well as through power purchased from the state and national grid. Power demand, however, fluctuates based on seasonality and the time of the day; the maximum demand for power is usually during the evening hours, with less power needs during rest of the day. The combined generating capacity of Co.'s four plants is 975 MW.
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