IGI Logo

CESC’s reported revenue in Q1FY26 came in at Rs52.9bn, ~7% YoY higher than our estimate (albeit in line with consensus) at a consolidated level, while 31% up on a QoQ basis. Consolidated EBITDA stood at ~Rs11.8bn, rising by a modest ~5% YoY, as the higher revenue and lower power purchase and fuel costs (-7% YoY) were broadly offset by ~Rs2.6bn reduction in regulatory income. Reported consolidated PAT was ~Rs4bn, up ~4% YoY and ~5% QoQ, while PAT margin stood at 7.8% (-20bps YoY). The company is actively progressing on its RE expansion plan, which is visible in timely signing of PPAs, connectivity submissions, and focused acquisition of land parcels. Hence, we retain a positive stance and BUY on the stock, with Jun-26E TP unchanged at Rs225.

Result highlights

Revenue increased by ~7% YoY, primarily led by increased PLF at Haldia (97% vs 78% in Q1FY25) and higher tariffs from the new PPA at Chandrapur. The EBITDA increase was mainly a consequence of higher tariffs at Chandrapur and cost passthrough at NPCL, as per the modified UPERC MYT order. The total units sold reduced by ~2% YoY to 3,671MU, primarily led by reduced sales at Budge Budge and Chandrapur. This was also visible in the PLFs at these plants falling by 5%/7% YoY to 85%/87% respectively. However, the sales at Haldia realized at 1,181MU reflect a significant rise of ~25% YoY. The company’s T&D losses continued to be exceptional across its distribution facilities, namely, Kolkata/NPCL/Chandigarh/Rajasthan at 6.5%/9.7% /12%/12.8% respectively while the Malegaon facility continued to witness considerably high losses at ~40.8%.

Management highlights

The company has made significant strides in the RE segment by signing PPAs for 750MW, with signing of another 450MW PPA in progress. Additionally, it has applied for connectivity of 7.3GW across phases 1 and 2 and secured approval for a capacity of 3.8GW. Further, it has acquired 3,000 acres of land and is evaluating opportunities to acquire an additional 8,000+ acres. The company has also signed agreements for 3.5GW of wind projects with Inox, Suzlon, and Envision. In the generation space, Haldia achieved the first rank across all thermal plants for YTD Jun25, with a PLF of 97%. As part of a constructive focus on the distribution segment, Malegaon initiated a rigorous vigilance and disconnection drive to reduce T&D losses and improve collection efficiency.

Valuation

We value CESC on SOTP basis, considering each of its business segments separately. The regulated ROE-based thermal business is valued using a long-term P/B multiple of 1.5x while NPCL is valued at a 1.6x P/B multiple. Haldia, Chandrapur, and Purvah Green are valued on a DCF basis using terminal growth rates of 3%/3%/5% respectively, with varying betas reflecting the changing risks in the business.

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354