Buy CESC - Motilal Oswal

CESC (CESC IN; Mkt Cap USD0.7b, CMP Rs272, Buy)

During 3QFY11, CESC reported net profit of Rs1.1b (up 8% YoY), in-line with our estimates, while revenue was higher on account of increased fuel charges.

Power purchase cost for 3QFY11 declined to Rs980m, due to lower demand/ additional generation from 250MW Budge Budge project.

2.5GW of generation projects are at advanced stages of development / have entered the construction phase, with all initial clearances and land acquisition.

In 3QFY11, total area under operations has declined by 2% QoQ to 0.86msf, vs 0.876 as at Sep-10. Sales have improved to Rs1048/sq.ft in Dec-10.

Valuations and view: We expect CESC to report standalone net profit of Rs4.7b in FY11E (up 9% YoY), Rs4.9b in FY12E (up 3% YoY) and Rs5b in FY13E (up 2% YoY). Stock quotes at PER of 7x FY12E and 6.9x FY13E on standalone basis. Maintain Buy.

Source : Equity Bulls

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