CESC Ltd., is a power utility company based in Kolkata belonging to the RP Goenka group. Its history dates back to 1897 when it was Sterling Company and was given the license by the Government to generate and distribute power for Greater Kolkata reason. CESC has an assured coal linkage for 80% of its requirements. Also, 75% of the additional 1,200 MW capacity that it is building will be sold at regulated prices. Only the remaining portion needs to be sold at market rates. As of now it operates four plants with total capacity of 1225 MW from four generating units Budge (750 MW), Southern (135 MW), Titagarh (240 MW) and New Cossipore (100 MW). It also has a large retail business domiciled in Spencer’s with a strong foot print in South India. It has some properties awaiting development.
CESC saw a revenue growth of 8.3% year on year mainly due to a 6% pass through a fuel cost. It reported a 19.3% rise in Profit after tax to Rs. 136 Crs. Retail profitability increased from an EBIDTA of Rs.30/- per sqft to Rs.57/- per sqft. It acquired a controlling stake in First Source a global BPO solution provider.
CESC is speedily completing its expansion at Chandrapur and Haldia which from early 2014 will generate additional power of 1200 MWs. It also looking for strategic investors in Spencer’s after the recent opening of retail to FDI. Better Outlook of retail subsidiary are:
- Approved of FDI in retail will expedite turnaround in the financial performance of the company
- Expanding operational area in Hyper and Super formats.
- More focused approach by opening stanalone stores for is Apparel Brands apart from Fish & Meat stores.
- To reduce the share of low margin grocery products it has shifted its Focus on private labels as well as International brands
We expect the company to report a growth of over 30% in profits in the next 3 years. We also expect revenue of the company to touch Rs 5,000 Crores and an EPS of Rs 50.00 for FY 2013. Giving a PE of 9 in this uncertain environment. We bet the stock to grab at 305 for Target 385 for the Time Period 9-12 Months.