CESC’s Q3FY19 PAT surpassed the consensus estimate 5 percent, bolstered by Rs 200-crore regulatory income booked during the quarter. On the generation front, while volume at 1,365 MU, it remained flattish YoY.
The Kolkata distribution circle’s T&D losses dipped 100 bps YoY.
CESC’s regulated businesses (standalone) offer a strong FCF (Rs 1,000 crore on an average) which can now be better utilised for expanding the power portfolio post demerger of non-power businesses; expanding the distribution franchise business (Malegaon circle won recently) is case in point.
We believe the demerger offers a more specific investment opportunity in power business and expect the stock to re-rate. Tie up of Dhariwal open capacity remains key monitorable. We maintain ‘buy’ with target price of Rs 840.
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T&D loss for the regulated distribution business dipped 100 bps YoY to 9.80% (10.76% in Q3FY18). Overall revenue was flattish YoY at Rs 170 crore.
CESC booked regulatory income of Rs 200 crore, which boosted the overall PAT growth of 12 percent YoY. Adjusting for the regulatory income, EBITDA/PAT was up 5 percent/12 percent YoY on like-to-like basis.
PLFs at Haldia remained healthy at 88.16 percent (up 100 bps YoY), aided by strong demand from CESC. Dhariwal’s PLF jumped to 72.85 percent from 37.30 percent, led by short-term PPAs of 185MW, which the company has been pursuing with Maharashtra discom under case four bidding (expired in Jan 2019).
In the distribution franchise business, the company expanded its footprint with recently winning the distribution rights for Malegaon circle in Maharashtra (customer base of more than 100,000 currently).