Total Income at 2,420 Cr
3,227 Cr (-25.37%) YoY | 2,433 Cr (0.51%) QoQ
Year ending revenue: 11,014 Cr Vs. 10,664 Cr (3.21%)
Net Profit of 200 Cr
231 Cr (-13.41%) YoY 446 Cr (-55.13%) QoQ
Year ending Net profit: 1,306 Cr Vs. 1,184 Cr (10.34%)
EPS (in Rs.) 14.93
17.51 YoY | 33.13 QoQ
Year ending EPS: 97.71 Vs. 88.84
View: Result is overall good. YoY revenue declined and profit also declined since Q1FY21 is not comparable with Q1FY20 as Covid-19 pandemic impacted the topline and bottom line.
Business Updates & Highlights:
Q1FY21 cons EBITDA was around INR 577 Cr Vs. 758 Cr in Q1FY20 Vs. 626 Cr in Q4FY20 therefore declined by 23.9% in YoY and 7.8% in QoQ. EBITDA margin in Q1FY21 was 23.8% Vs. 23.4% in Q1FY20 VS. 25.7% in Q4FY20.
Financial
ROE and ROCE is around 14% and 13% respectively and book value per share is around INR 726 and share is currently trading at 0.86x of its book value. Company is currently trading at annualized PE of around 11 which is average as per Industry benchmark. Promoter holding in company is around 49.9% which is strong and stable. FIIs and mutual fund hold around 17.9% and 19.7% respectively. Borrowing cost is stable in this quarter.
Position: Share strong support price is INR 550. Long term investor should continue with the company.
Share View: Share price high 854 (52 week) and now 620. Incorporated in 1978, CESC is the flagship company of the RP-Sanjiv Goenka Group and is involved in the generation and distribution of electricity. CESC has the licence to supply electricity in Kolkata and Howrah till September 2, 2038. The licensee area is of 567 sq. km and it caters to over 3.3 million consumers with an own generation capacity of 1,125 MW (coal based). CESC has two wholly-owned subsidiaries, Haldia Energy Limited and Dhariwal Infrastructure Limited, each operating 2X300-MW coal-based thermal power plants. The entire generation capacity of Haldia Energy Limited is tied-up under long-term cost-plus based power purchase agreement (PPA) with CESC.
Opportunities
CESC’s power distribution license in Kolkata is valid till September 2, 2038. Being the sole power distribution licensee in its coverage area, it faces low competitive pressures, which supports its credit profile. The rating also derives comfort from the long residual validity of the power distribution license, which gives earnings visibility over the long term. CESC has been able to maintain a collection efficiency of over 99.5% over the years, supported by the above average income levels in a metro city, and increased adoption of digital payments by consumers. In FY2020, around 51% of CESC’s LT consumers made bill payments through digital channels, which supported a faster cash conversion cycle. High reliability of power supply, with 80-90% of demand met from own its generation stations. Operating cash flows was also improved in March 2020 as compared to March 2019. Although last 5 years topline was slightly negative but profit growth in last year was exceptionally well.
Risk
System demand to decline in the current fiscal following the Covid-19 pandemic; collection efficiency adversely impacted in Q1 FY2021 resulting in working capital blockage – With commercial establishments and bulk consumers, like airports and metro railway, remaining closed during the lockdown following the Covid-19 pandemic (lockdown imposed from March 22, 2020). Given the expectation of a temporary decline in sales volume, and a likely drop in average realizations due to lower HT sales, fresh regulatory asset build-up in FY2021 would register its steepest annual rise as on date unless CESC is able to implement meaningful cost reduction measures. CESC’s average retail tariff (including MVCA) has increased only 4.9% since April 2015. In fact, its tariff levels have remained unchanged since January 2017. Due to the current business environment, it’s highly unlikely to revise the rate further.
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