IGI Logo

2QFY25: Better than expected; RE building blocks in place

CESC reported revenue of INR 48.2bn (2% YoY, 4% JMFe) for 2QFY25 driven by strong growth in power demand across the circles (5% YoY in Kolkata) and recovery of fuel and power purchase adjustment surcharge. EBITDA came in at INR 10.2bn (1% YoY, 7%JMFe). Adj. PAT came in at INR 3.5bn (1% YoY,3% JMFe). The generation from two of its generating stations, 750 MW Budge Budge and 135 MW Southern has reduced as the company has opted for buying cheap power from the exchange for its Kolkata distribution circle rather than generating. The company is moving ahead with its target of adding 1.4GW/ 3.2 GW of RE capacities by FY27/ FY29 as it has initiated process for grid connectivity and land acquisition. With demand momentum in power distribution circles, progress in renewables, and turnaround of Rajasthan distribution franchisee, we retain our BUY rating with a SOTP-based TP to INR 206.

* Segmental performance: CESC reported consol. adj. PAT of INR 3.5bn (1% YoY). The Rajasthan franchisees (Kota/ Bikaner/ Bharatpur) reported a PAT of INR 10mn for 2QFY25 (vs. loss of INR 30mn in 2QFY25). Loss increased at Malegaon to INR -430mn in 2QFY25 vs. loss of INR 280mn in 2QFY24. The turnaround of Malegaon is expected to take time. Dhariwal has been doing well backed by the 210MW medium-term PPA with Central Railways, and sale of balance power in the energy exchanges (PAT grew by 19% YoY to INR 810mn 2QFY25). With 530mn PAT in 2QFY25, Noida reported 43% YoY increase. Haldia reported profit of INR 740mn (12% YoY) led by higher generation (+6% YoY). Company reported standalone PAT of INR 2.2bn (-5% YoY) for 2QFY25 led by 15% growth in units purchased.

* Operations highlight: The generation from two of its generating stations, 750 MW Budge Budge and 135 MW Southern has reduced (1578 MU during 2QFY25 vs. 1762 MU during 2QFY24, -10.4% YoY). The company has opted for buying cheap power from the exchange for its Kolkata distribution circle rather than generating where the cost of generation is high (INR 3.1/kWh for Budge Budge and INR 4.2/kWh for Southern).

* Renewables is catching up: CESC has targeted 1.4GW / 3.2 GW of RE capacity by FY27/ FY29 which includes 1.7 GW wind and 1.5 GW solar capacity. It has applied/secured for connectivity of 5.7 GW across high wind and solar states (Gujarat, Madhya Pradesh, Rajasthan, Andhra Pradesh and Karnataka). Its platform is ready for participation in various bid formats invited by Renewable Energy Implementing Agencies (REIA)/discoms (Exhibit-1 and 2).

* Chandigarh DISCOM: Eminent Electricity Distribution Ltd, a wholly-owned subsidiary of CESC, successfully secured the bid to acquire a 100% stake in the power distribution company (DISCOM) of Chandigarh, offering the highest bid of INR 8.71 bn in 2021. Competing bidders included Torrent Power, NTPC Limited, ReNew Power, Adani Group, Tata Power, and Sterlite Power. However, in Dec 2020, the High Court of Punjab and Haryana issued a stay order on the privatization of Chandigarh's DISCOM on the petition filed by employees’ union. On Nov 6, 2024, the High Court dismissed the petition,thereby facilitating the privatization. The distribution circle currently experiences losses of less than 8% and maintains a cash surplus; however, it requires significant modernization to accommodate increased load demands. We expect union to appeal against the judgment in Supreme Court.

* Other key highlights: - Haldia TPP continued with steady supplies to Kolkata distribution business and reported PLF of 100% during the quarter.

- Kolkata Distribution business witnessed 5% YoY demand growth during Q2FY25.

- CESC Kolkata Distribution started recovery of fuel and power purchase adjustment surcharge (FPPAS) arising on account of variation in the price of fuel and power purchase cost from June 2024 which resulted in one-time higher regulatory assets.

- Noida Power (NPCL) reported sales of 1,056 MU during Q2FY25, registering a YoY growth of 11%.

- Rajasthan DFs remained EBITDA positive and reported consolidated YoY sales growth of 7% during the quarter.

- Chandrapur TPP continued with a strong financial performance backed by substantial tie up of its total capacity and higher generation. PLF during the quarter stood at 92.3% vs. 84%/80% during FY24/ FY23.

Please refer disclaimer at https://www.jmfl.com/disclaimer

SEBI Registration Number is INM000010361