CESC sees stable Q3; turnaround in subsidiaries, tariff order can boost earnings


CESC Ltd reported stable performance for the quarter ended December (Q3). Key subsidiaries Dhariwal Infrastructure Pvt Ltd and Haldia Energy Ltd recorded good business. Profit at Dhariwal Infrastructure jumped to 50 crore, rising 79% year-on-year, while Haldi Energy reported a bottomline of 83 crore.

At standalone level, too, performance was decent, even as unit sales for electricity failed to show significant improvement. Unit sales rose a marginal 0.7% year-on-year during the quarter. For the first nine months, unit sales were up 9%, as per analysts.

The company’s standalone revenue at 1,662 crore was comparable to 1,659 crore in the year-ago quarter. Net profit of 184 crore in Q3 was marginally higher than 182 crore in the year-ago-period. Tariff order for the Kolkata licence area is yet to come and remains critical for standalone earnings.

At the consolidated level, while Dhariwal Infrastructure and Haldia Energy contributed well, earnings of other subsidiaries was a mixed bag. Nine month sales at Rajasthan distribution circle reported a loss of 19 crore, as per Emkay Global Financial Services Ltd data. Malegaon Power too needs to post improved performance, while Crescent Power Ltd and Surya Vidyut Ltd though reported profit but numbers declined during the first nine months of the fiscal.

Analysts at Kotak Institutional Equities said performance across divisions should be seen in the context of loss of volumes due to periodic lockdowns. A rebound in subsidiaries’ performance and the tariff revision order for Kolkata distribution circle remain important for earnings growth.

In a positive, Dhariwal Infrastructure that is benefitting from good merchant power sales is expected to see some order inflows. It had participated with a 210 MW (megawatt) bid in a medium-term power purchase tender floated by Railway Energy Management Co. Ltd. 

Railway Energy Management had floated a 1,500MW tender for three years against which it received bids only for 600 MW, said analysts at HDFC Securities Ltd. HDFC analysts have not yet factored these developments into their estimates, and are awaiting the awarding of the order. 

Further, the power purchase agreement with Maharashtra discoms for supply of 185 MW has also been extended to 31 March 2022.

Overall, analysts have a positive view on the stock. Those at Kotak Institutional Equities said, “Our favourable stance is predicated on – stability of regulated business, moderating losses from new distribution circles and improving utilisation for Dhariwal.”

CESC shares rose 1.78% in early deals on Friday.

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