MOSL: CESC (Buy)-Dhariwal turning around, DF operations improving-FCF generation increasing rapidly
CESC: Dhariwal turning around, DF operations improving; FCF generation increasing rapidly; Re-iterate Buy
(CESC IN, Mkt Cap USD1.2b, CMP INR661, TP INR841, 27% Upside, Buy)
FY19 consol. adj. PAT grew 43% YoY to INR11.8b (consol. numbers are reported annually) v/s our est. of INR10.1b. The strong performance was driven by sharp reduction in losses at Dhariwal and lower losses in distribution franchisee (DF).
- Standalone (S/A): PAT grew ~8% YoY to INR9.4b. T&D losses were lower ~70bp YoY to 9% (down ~260bp in the last three years). Sales were flat at 10.4BU due to weak demand and weather conditions. Capitalization is estimated at INR3.8b, implying regulated equity increase of ~3% YoY in FY19.
- Haldia: PAT was broadly unchanged at INR3.2b as it continues to benefit from favorable efficiency norms. Haldia continues to earn >20% core RoE.
- Dhariwal: PAT loss halved from ~INR2b in FY18 to ~INR0.9b in FY19 benefiting from short-term PPAs and tolling arrangements. PLF increased 16pp YoY to 61%.
- DF: EBITDA loss reduced from INR1b in FY18 to INR0.2b in FY19 on lower T&D losses. PAT loss halved from INR1.2b in FY18 to INR0.6b in FY19. For 4QFY19, standalone PAT grew 9.2% YoY to INR3.1b.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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