Buy CESC; target of Rs 204: Prabhudas Lilladher

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • CESC's diversified power business provides stable earnings visibility, with a cash-generative distribution franchise and integrated generation assets.
  • The company plans to scale up its renewable capacity from 0.4GW to 4.5GW by FY29, with PPAs already secured for 4.3GW, providing strong revenue visibility.
  • Improving T&D losses across newer franchises and a potential reduction in Malegaon T&D losses are expected to contribute to earnings improvement.

Thesis Validation Checklist

  • Completion of the Renew acquisition by mid-November 2026.
  • Commissioning of the transmission line for 400MW of renewable capacity in Q4FY27.
  • Reduction in Malegaon T&D losses in Q3/Q4FY27.
  • EBITDA CAGR of ~15% over FY26-29E and EPS CAGR of ~6% over FY26-29E.
  • The stock's current valuation at ~1x FY29E BV, in line with its 10-year historical average, with an ROE of 12-13% and an attractive dividend yield of ~5%.