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Stable quarter

Result Highlights

* Standalone PAT for the quarter stood at Rs1.84bn in Q3 - up 1% YoY and in line with our estimate. Flat earnings were largely on account of the delay in Tariff order for the Kolkata license area. We believe that once the Tariff order comes, there will be decent growth in standalone earnings.

* CESC also reported stable earnings for the majority of its subsidiaries. Dhariwal Infrastructure posted strong earnings – 9M PAT of Rs1,090mn vs. Rs750mn in 9MFY21; Q3FY22 PAT was Rs500mn. This was largely due to the sale of power in the short term due to high prices at the power exchange. Dhariwal participated with a 210MW bid in a medium-term power purchase tender. If it wins the bid, tied power at Dhariwal will increase.

* We maintain Buy with a Sept’22 TP of Rs101. CESC remains a 5% dividend yield stock with mid-single digit earnings growth.

* Stable standalone earnings: Given that the Tariff order for the Kolkata license area has still not come, standalone earnings were expected to be largely flat over last year. Standalone PAT for the quarter stood at Rs1.84bn – up by 1% YoY.

* Stable performance by subsidiaries: Haldia Energy reported 9M PAT of Rs2.73bn vs. Rs2.85bn a year ago. Crescent Power’s PAT stood at Rs240mn vs. Rs250mn. Noida Power reported a 9M PAT of Rs790mn vs. Rs700mn in 9MFY21. Loss at Malegaon came down to Rs410mn from a loss of Rs540mn. While the performance of the Malegaon circle was satisfactory, Rajasthan discom performance was not. Rajasthan circles reported a higher loss of Rs190mn vs. a loss of Rs110mn. Overall, consolidated PAT for 9M stood at Rs9.6bn vs. Rs9.34bn in 9MFY21.

* Strong earnings by Dhariwal Infrastructure: 9MFY22 PAT for Dhariwal stood at Rs1,090mn vs. Rs750mn in 9MFY21 due to high short-term power prices at the power exchange in the current quarter. Q3FY22 PAT stood at Rs500mn.

* Dhariwal Infrastructure has participated with a 210MW bid in a medium-term power purchase tender floated by the Railway Energy Management Company Limited for a period of three years.

* Valuation and outlook: The board has declared an interim dividend of Rs4.5/share. Improvement/expansion of the distribution business and the performance of the Dhariwal plant remain the key growth drivers for CESC. The Kolkata license area tariff order is expected in the near term. The dividend yield stands at ~5%. We maintain our TP of Rs101 (Sep’22E). Retain Buy.

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