MOSL: CESC (Buy)-S/A gen muted; Dhariwal improves on new PPA
CESC: S/A gen muted; Dhariwal improves on new PPA
(CESC IN, Mkt Cap USD1.4b, CMP INR728, TP INR970, 33% Upside, Buy)
Dhariwal losses reduce, DFs’ performance improves
- CESC’s third-quarter results highlight the benefit of the improved performance of its DF businesses and lower losses at Dhariwal, with consol. PAT increasing 12% YoY. S/A PAT grew 2% YoY (in-line).
- We expect the performance at Dhariwal and DFs to continue to improve. Despite factoring in the tightening of norms at Haldia and S/A, the stock trades attractively at 7.5x FY21E P/E. Maintain Buy with a TP of INR970.
S/A sales and generation muted
- S/A PAT increased ~2% YoY to INR1.8b (in-line) in 3QFY20. Sales volume remained flat YoY at 2.1BU, while generation was down ~10% YoY. Estimated T&D losses stand at ~9%.
- PAT increased by ~12% YoY to INR2.7b in the quarter, largely on the back of lower losses at Dhariwal and the better DF performance. For 9MFY20, consol. PAT was up 12% YoY at INR8.6b.
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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