CESC surges 6%, hits 52-week high post Q4 results, stock split approval

Shares of CESC surged 6 per cent and hit a 52-week high of Rs 819.15 on the BSE in intra-day trade on Thursday after the company reported healthy performance in operating front for March quarter (Q4FY21). Meanwhile, the board approved sub-division of existing 1 share of Rs 10 each into 10 shares of Re 1 each.

The company intends to improve the liquidity of its shares in the stock market by reducing the nominal value of the shares through the process of subdivision, CESC said on rationale behind the stock split.

Meanwhile, in Q4FY21, CESC reported a mixed set of numbers wherein revenue was in line but EBIDTA (earnings before interest, taxes, depreciation, and amortisation) was ahead of estimates. The company posted 8 per cent year on year (YoY) growth in standalone net profit at Rs 270 crore. ICICI Securities expected profit of Rs 281.70 crore for the quarter. The miss was on account of higher interest outgo in Q4FY21 on account of rise in long term debt, the brokerage firm said.

The company’s reported revenues grew 7 per cent YoY at Rs 1,688 crore. EBITDA came in at Rs 310 crore against brokerage estimate of Rs 281.5 crore. The beat was mainly due to lower power purchase and fuel costs for Q4FY21. We still do not have the operational data but believe there was some miss on energy sold, ICICI Securities said in a note.

“Volumes in the standalone entity improved, but grew just 6 per cent YoY on a low base. Standalone PAT rose 8 per cent YoY, while consolidated PAT fell 4 per cent, led by lower profit at Dhariwal and Crescent and Surya. The standalone PAT miss was on account of) a modest 6 per cent YoY rise in sales volumes at 2.2BU (despite a low base; 4QFY20: -8 per cent YoY), and regulatory adjustments based on annual performance – the impact of which would have been felt in 4QFY21,” Motilal Oswal Securities said in result update.

Subdued power demand has impacted profitability for CESC’s businesses. However, Dhariwal has turned profitable, and performance of distribution franchises (DFs) should improve as the management gains better understanding of the circles and leverages its experience in Kolkata. CESC’s existing Distribution business generates high RoE and delivers steady growth. Generation assets generate healthy FCF.  Untied generation capacity and scale-up of DFs have the potential to boost earnings, the brokerage firm said.