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For 2QFY2012, CESC posted a 26.5% yoy decline in its net profit on account of
customers being billed under existing tariff, as WBERC’s tariff approval for
FY2012 has been delayed. Although the current tariff provisions allow the hike in
fuel costs to be passed on automatically, CESC has to obtain WBERC’s orders for
passing on the additional fixed costs. However, the company would be
recovering higher tariff (adjusting for additional fixed costs incurred) in the
subsequent quarters with retrospective effect for 1HFY2012 after obtaining new
orders. On the retail business front, per sq. ft. sales of Spencer’s increased to
`1,066/month in 1HFY2012 (13% higher on a yoy basis). Store level EBITDA per
sq. ft. stood at `31 for 1HFY2012. We maintain our Buy view on the stock.
OPM down by 801bp yoy to 19.8%: CESC registered 12.2% yoy growth in its
standalone top line to `1,223cr, aided by 5% growth in sales volume and higher
fuel cost, which is a pass-on. The company’s OPM fell by 801bp yoy to 19.8%
because of lower realization due to delay in grant of tariff approval. The company
had cost adjustment of `67cr included in other expenses during the quarter as
against negative `217cr in 2QFY2011, resulting in operating profit declining by
20.1% to `242cr.
Valuation: We expect CESC’s standalone top line and bottom line to grow at a
CAGR of 10.3% and 4.0%, respectively, over FY2011–13E. At the CMP, the stock
is trading at 6.3x FY2013E EPS and 0.6x FY2013E P/BV. We have assigned 0.85x
FY2013E P/BV multiple to the company’s power business, considering its low RoE,
and have arrived at a value of `357/share. We have valued the retail business
and real estate business at `11/share each. We maintain our Buy view on the
stock with an SOTP-based target price of `379.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 2QFY2012, CESC posted a 26.5% yoy decline in its net profit on account of
customers being billed under existing tariff, as WBERC’s tariff approval for
FY2012 has been delayed. Although the current tariff provisions allow the hike in
fuel costs to be passed on automatically, CESC has to obtain WBERC’s orders for
passing on the additional fixed costs. However, the company would be
recovering higher tariff (adjusting for additional fixed costs incurred) in the
subsequent quarters with retrospective effect for 1HFY2012 after obtaining new
orders. On the retail business front, per sq. ft. sales of Spencer’s increased to
`1,066/month in 1HFY2012 (13% higher on a yoy basis). Store level EBITDA per
sq. ft. stood at `31 for 1HFY2012. We maintain our Buy view on the stock.
OPM down by 801bp yoy to 19.8%: CESC registered 12.2% yoy growth in its
standalone top line to `1,223cr, aided by 5% growth in sales volume and higher
fuel cost, which is a pass-on. The company’s OPM fell by 801bp yoy to 19.8%
because of lower realization due to delay in grant of tariff approval. The company
had cost adjustment of `67cr included in other expenses during the quarter as
against negative `217cr in 2QFY2011, resulting in operating profit declining by
20.1% to `242cr.
Valuation: We expect CESC’s standalone top line and bottom line to grow at a
CAGR of 10.3% and 4.0%, respectively, over FY2011–13E. At the CMP, the stock
is trading at 6.3x FY2013E EPS and 0.6x FY2013E P/BV. We have assigned 0.85x
FY2013E P/BV multiple to the company’s power business, considering its low RoE,
and have arrived at a value of `357/share. We have valued the retail business
and real estate business at `11/share each. We maintain our Buy view on the
stock with an SOTP-based target price of `379.
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