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Renewable execution, key driver

CESC (CESC IN) reported 6.5% YoY revenue growth to INR 56,070mn, while EBITDA declined 2.1% YoY to INR 10,390mn, with margin contracting to 18.5% from 20.1% in Q2FY26, resulting in PAT declining 2.2% YoY to INR 4,380mn. Standalone generation rose 16% YoY to 1,728MU, supported by improved PLFs at Budge Budge (90.4%) and Dhariwal (88.1%), while Haldia maintained a strong PLF of 99.2%. On the renewable front, Purvah Green's portfolio stands at 4.9GW, comprising 1.8GW operational and 3.1GW under implem entatio n. We retain Buy with an SOTP -TP of INR 228.

Topline rose 6.5%; PAT dropped 2.2% YoY:

Net sales from operations grew 6.5% YoY and 2.2% QoQ to INR 56,070mn. EBITDA stood at INR 10,390mn, down 2.1% YoY but up 16.1% QoQ. EBITDA margin stood at 18.5% against 20.1% in Q2FY26 and 16.3% in Q1FY27. Total expenses increased 8.6% YoY to INR 45,680mn, led by higher employee benefit expenses (+9.6% YoY) and other expenses (+6.9% YoY). The cost of fuel increased 2.6% YoY to INR 10,080mn. PBT before regulatory income declined 2.0% YoY to INR 4,870mn, while net regulatory income increased 37.5% YoY to INR 990mn. Consequently, PBT increased 3.0% YoY to INR 5,860mn. Reported PAT stood at INR 4,380mn, down 2.2% YoY but up 4.5% QoQ .

Thermal generation assets – Strong operating performance:

CESC's standalone generation rose 16% YoY to 1,728MU in Q2FY27, compared with 1,494MU in Q2FY26, while H1FY27 generation grew 15% YoY to 3,397MU from 2,966MU . Budge Budge Generating Station (BBGS), reported generation of 1,365MU in Q2FY27, up 5.4% YoY, while PLF improved to 90.4% from 85.8% in Q2FY26. Haldia Energy (HEL), with an installed capacity of 600MW, reported generation of 1,216MU compared with 1,234MU in Q2FY26, while maintaining a high PLF of 99.2% against 100.6% in the corresponding period last year. Dhariwal Infrastructure recorded generation of 1,085MU, up 3.9% YoY, while PLF improved to 88.1% from 85.2% in Q2FY26.

Purvah Green strengthening its renewable energy development pipeline:

Purvah Green has established a combined renewable portfolio of ~ 4.9GW, comprising 1.8GW of operational capacity and 3.1GW under implementation, including the proposed acquisition of 1,411MW of operating solar assets. The portfolio comprises ~ 3,515MW of solar, 1,385MW of wind and 2,230MWh of battery energy storage capacity. The company has a medium -term target of achieving 10GW of renewable capacity. Purvah Green has applied for 10.4GW of grid connectivity, of which 3.8GW has been secured, providing visibility for future project development and capacity expansion.

Retain Buy with a TP of INR 228: In our view, CESC is attractively positioned, on:

1) steady and low - risk earnings from regulated standalone operations in Kolkata and Haldia distribution businesses

2) options value of incremental earnings from the distribution franchisee in Rajasthan with a strong balance sheet

3) plans to invest in 3GW of RE assets

4) setting up a 10,500tonne annual green hydrogen production facility. We see substantial rerating potential post the commissioning of 3GW of RE project. We retain Buy with an SOTP -TP of INR 228. We revise our earnings by 3.7%/2.4%/1.4% for FY 27E, FY 28E and F Y 29E, led by upcoming RE projects.

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