MOSL: CESC (Buy)-Lower T&D and power sales support earnings-Demerger to unlock value; roll forward to FY20E
CESC: Lower T&D and power sales support earnings; Demerger to unlock value; roll forward to FY20E, Maintain Buy
(CESC IN, Mkt Cap USD1.9b, CMP INR992, TP INR1408, 42% Upside, Buy)
- CESC’s standalone 3QFY18 PAT grew 1.3% YoY to INR1.5b (in-line). Growth remains subdued due to a delay in the approval of tariff order for FY18, partly offset by gains from lower T&D losses and merchant power sales. T&D losses were down ~100bp YoY (unchanged QoQ) to 10.8%, driving efficiency earnings. It sold 212MU in the merchant power market, up 6x YoY. Distribution electricity sales grew ~12% YoY to 2.3BU, recovering from a weaker base.
- Spencer – stronger base and store closure impact sales growth
- Same-store sales declined ~5% YoY due to a stronger base, as demonetization had boosted sales for modern retail format stores. Sales were also impacted by the closure of one of its large stores due to renovation (restarted in December). EBITDA, however, remains positive, driven by cost savings and GST benefits. Store area was marginally lower, even as one store was added QoQ.
- Dhariwal – PPA capacities are running as expected. The Maharashtra flexible coal PPA (6 months) of 185MW is expected to start soon. The BEST PPA of 150MW, where CESC was L1, has been cancelled.
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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