CESC sees stable T3; subsidiary turnaround, rate order may increase profits


CESC Ltd reported stable performance for the quarter ended December (Q3). The main subsidiaries Dhariwal Infrastructure Pvt Ltd and Haldia Energy Ltd recorded good business. Dhariwal Infrastructure’s profit soared to 50 crore, up 79% year-on-year, while Haldi Energy reported net profit of 83 crore.

Also at the stand-alone level, performance was correct, even if unit electricity sales did not show any significant improvement. Unit sales edged up 0.7% year over year in the quarter. For the first nine months, unit sales rose 9%, analysts said.

The company’s own-source revenue at 1,662 crore was comparable to 1,659 crores in the prior year quarter. Net profit of 184 crore in the third quarter was slightly higher than 182 crore in the period a year ago. The tariff order for the Kolkata license area is yet to come and remains critical for own source revenue.

At the consolidated level, while Dhariwal Infrastructure and Haldia Energy contributed well, the profits of the other subsidiaries were mixed. Nine-month sales to the Rajasthan distribution circle reported a loss of 19 crore, according to data from Emkay Global Financial Services Ltd. Malegaon Power is also expected to show improved performance, while Crescent Power Ltd and Surya Vidyut Ltd reported profits, but numbers declined in the first nine months of the financial year.

Kotak Institutional Equities analysts said the performance of all divisions should be viewed in the context of lost volumes due to periodic shutdowns. A rebound in subsidiary performance and the Calcutta Distribution Circle tariff review order remain important to earnings growth.

On the positive side, Dhariwal Infrastructure, which is benefiting from good sales of merchant electricity, should register new orders. It had participated with an offer of 210 MW (megawatts) in a call for tenders for the purchase of medium-term electricity launched by Railway Energy Management Co. Ltd.

Railway Energy Management had been bidding for 1,500 MW for three years for which it only received bids for 600 MW, analysts at HDFC Securities Ltd said. HDFC analysts have not yet factored these developments into their estimates and are awaiting order award.

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

Overall, analysts have a positive view of the stock. Those at Kotak Institutional Equities said, “Our favorable position is based on stable regulated business, moderating losses from new distribution circles and improving Dhariwal utilization.”

CESC shares rose 1.78% in early trades on Friday.

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