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CESC reported consolidated net revenue of INR 34.6bn (+11% YoY, -12% JMFe) during 3QFY23 led by steady growth in power demand across all circles. EBITDA came in at INR 8.2bn (+10% JMFe) benefiting from lower cost of power purchased. CESC reported PAT of INR 3.1bn (-3% YoY, +30%JMFe) largely led by growth in other income. The Board of Directors has declared an interim dividend of INR 4.5/sh. The company continued its focus on T&D loss reduction which remains below 8% in Kolkata. JM View: We find CESC attractively priced at 0.8x FY25E P/B with potentially steady earnings growth on i) moderating losses at franchises; ii) recent PPA tie-up at Dhariwal; and iii) steady growth in regulated profitability with limited earnings risk. We expect CESC to be a potential beneficiary of the impending turnaround of the power distribution business. Going forward, the earnings are expected to gradually improve with consistent strong performance at DIL’s plant and potential turnaround of Rajasthan and Malegaon DF in FY24/25E, while standalone business is largely stable given regulated RoE model. The stock also offers a healthy dividend yield of c.6%. Hence, we maintain our Buy rating on CESC with an unchanged SoTP-based TP of INR 100.

* Segmental performance: CESC reported consolidated PAT INR 3.1bn (-3% YoY, +30%JMFe) largely led by growth in other income. The 9MFY23 losses at Rajasthan franchisees increased to INR 290mn (vs. loss of INR 190mn in 9MFY22) and at Malegaon to INR 670mn vs. loss of INR 410mn in the same period last year. Dhariwal project reported a strong 9MFY22 performance (+152% growth) backed by the 210MW medium term PPA with Central Railways and higher prices in the energy exchanges. Noida reported 65% YoY growth in 9MFY22 profits. Standalone PAT remained flattish (+2% growth) led by 2.6% growth in units sold while Haldia reported a 14% decline in PAT.

* Other Key Highlights:

 - CESC’s Distribution business witnessed over 3% demand growth for the quarter and 10% growth in YTD 9MFY23. Rajasthan DF business reported 21% YoY growth in gross revenue which stood at INR 15bn in YTD9MFY23 as against INR 12bn over the same period last year.

- CESC signed a long term Renewable PPA with SECI (Solar Energy Corporation of India) for 100MW Wind Solar Hybrid for duration of 25 years.

- It has also floated a tender to procure 150MW Wind Solar Hybrid renewable power under long term PPA.

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