Target: ₹151

CMP: ₹122.56

In Q2-FY24, CESC exhibited consistent financial performance. Revenue from operations surged to ₹4,352 crore, marking an 11.2 per cent y-o-y increase and a 1 per cent q-o-q rise, primarily attributed to an uptick in average tariffs and a resurgence in demand following the recovery in Q1-FY24. EBITDA reached ₹646 crore, soaring by 31.8 per cent y-o-y but experiencing a 10.8 per cent decrease q-o-q.

EBITDA margins strengthened to 14.8 per cent y-o-y, a 230 bps increase, driven by reduced energy consumption costs. However, the cost of energy consumed increased on a quarterly basis, causing a 200 basis points decline, mainly due to the escalation in coal prices.

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The reported PAT reached ₹363 crore, demonstrating a robust 13.8 per cent y-o-y rise and a marginal 1.4 per cent decrease from the preceding quarter. It is anticipated that the PAT margins will be maintained owing to the industry’sstable earnings model.

We uphold our Buy recommendation for CESC, with a revised target price of ₹151. This adjustment is based on a P/B ratio of 1.5x, leveraging the projected BVPS of ₹100.8 (FY25E).

Additionally, a strong demand in the power sector, attributed to substantial advancements in industrial and economic activities, has led to a rebound in Q1-FY24.