CESC Limited - Standalone result in-line :: Macquarie Research,

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CESC Limited
Standalone result in-line
Event
 CESC reported FY11 standalone NPAT of Rs4.87bn, within 1% of our
estimates – highlighting the regulated nature/low risk of the integrated Kolkata
assets. The biggest surprise in 4Q11 was lower generation volumes due to 1.
A plant shutdown at Budge Budge (750MW) for around 10 days, and 2. Lower
merchant realisations, leading to less scheduling (need >Rs2.50/kWh to profit
from merchant). However, EBITDA and NPAT for the quarter were still within
3% of our estimates, so not material.

 We await the 4Q11 results for retail, which should be available over the next
2-3 weeks. With the stock trading on 11.5x FY12E consolidated NPAT, we
highlight the value proposition of this mid-cap and retain our Outperform
recommendation.
Impact
 Standalone results inline: reported 4Q11 NPAT of Rs1.12bn vs. our
estimate of Rs1.14bn, while EBITDA came in at Rs2.66bn vs our Rs2.74bn
estimate. This translated to FY11 NPAT of Rs4.87bn vs our estimate of
Rs4.90bn on a standalone basis.
 Volumes softer in 4Q11 – plant shutdown and low merchant: the biggest
deviation in our estimates was generation volumes of 1,826GWh in 4Q11,
23% lowering than our estimate of 2,377GWh, leading to revenues of
Rs8.95bn, 14% below our estimate of Rs10.4bn. However, this was largely
offset by lower costs, leading to EBITDA within 3% of our 4Q11 forecast.
 More colour on retail over next few weeks: the retail business is expected
to drive earnings volatility for CESC so we await more clarity on this business
in 4Q11. We understand that CESC will provide these numbers over the next
2-3 weeks.
Earnings and target price revision
 No change.
Price catalyst
 12-month price target: Rs384.00 based on a Sum of Parts methodology.
 Catalyst: loss reduction in retail over next 12 months.
Action and recommendation
 Outperform.