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RE guidance upgraded

Reported Q1 consolidated PAT of INR 4.2bn (+4% YoY), 7% below our estimate, primarily due to higher losses at Malegaon. Malegaon loss widened to INR 430mn from INR 170mn QoQ, with T&D loss at 36% vs 33% QoQ. Standalone PAT grew 4% YoY, rajasthan Discoms continued their strong performance, reporting PAT of INR 190mn vs INR 80mn YoY, while Noida PAT grew 4% YoY to INR 520mn. CESC has raised its FY29 renewable capacity target to 4.5GW from 3.2GW earlier, following the proposed acquisition of ReNew’s 1.4GW operational renewable portfolio, which is expected to close by Oct-26. Of the 4.5GW FY29 target, PPAs for 4.3GW have already been signed, including the acquired capacity, while transmission availability has been secured for planned FY29 commissioning. We have incorporated the acquisition in FY27/28E, resulting in a 6%/11% upward revision to EBITDA estimates and raising our SOTP-based TP to INR220. At ~12x FY28E EPS, the stock remains attractively valued, in our view, given the expected 15% EBITDA CAGR over FY26-28E. BUY

Soft Q1: CESC reported revenue (including regulatory income) of INR 57 bn in Q1FY27, up 4% YoY. EBITDA was down 2% YoY to INR 10.8 bn, impacted by increased personnel costs, power purchase costs and other expenses. EBITDA margins stood at 19% vs 20.1% YoY. Regulatory income went down by 21% YoY to INR 1.8 bn. PAT stood at INR 4.2 bn, up 4% YoY, and was supported by lower Depreciation and interest cost during the quarter. Board declared interim dividend of INR 6 per share implies a payout of ~46% on our FY27E EPS estimate.

Acquisition strengthens CESC’s renewable platform; valuation remains reasonable:

CESC's renewable arm, Purvah Green Power has signed an agreement to acquire ReNew's 1.4 GWp operational renewable portfolio (1.36 GWp solar and 72 MW wind) at an EV of INR 48.6 bn, with the transaction expected to close by Oct-26. The acquired assets are expected to generate ~INR 6 bn revenue and ~INR 5.2 bn EBITDA, implying an EV/EBITDA of ~9x and an acquisition cost of ~INR 34 mn/MW (DC), broadly in line with replacement cost. While the portfolio's EBITDA yield of ~INR 50 mn/MW (AC) is modestly lower than CESC's existing renewable assets (INR 60–65 mn/MW), the acquisition significantly scales up Purvah's operational renewable capacity to >1.8 GWp from ~0.4 GWp. With INR 56 bn of consolidated cash at FY26-end, CESC has adequate balance-sheet strength to fund the acquisition.

Renewable Capacity Expansion Accelerates Growth Visibility:

CESC has significantly accelerated its renewable expansion through the acquisition of a 1.4 GWp operational portfolio, taking its total contracted renewable capacity to 4.5 GWp plus future bid wins from 3.1 GWp. Of this, 1.8 GW is now operational, while the balance 2.7 GW is under implementation, providing strong growth visibility over the next 2–3 years. Management expects 2.2 GW of capacity to be operational by end-FY27, supporting a meaningful ramp-up in renewable revenues and cash flows. The acquisition complements the existing pipeline of solar, wind, hybrid, RTC and BESS projects, while improving the proportion of operating assets within the portfolio. With the acquired assets generating cash flows from day one and the organic pipeline progressing as planned, CESC is well positioned to execute its longterm renewable growth strategy, with a target of building a 10 GW renewable portfolio.

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