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Home >Markets >Mark To Market >CESC’s steady recovery in the March quarter brings respite

Shares of CESC Ltd hit a 52-week high on Thursday in early deals on the National Stock Exchange. CESC announced its quarter and year ending March results on Wednesday after market hours. Here, the performance of subsidiaries and the modest recovery in the standalone business is encouraging.

Overall, CESC’s reported consolidated net profit for the March quarter declined by 3.6% year-on-year to 423 crore. This was partly helped by a modest 8% growth in the company’s standalone net profit. Among the subsidiaries, Dhariwal Infrastructure Ltd reported a profit after tax of 31 crore for Q4, taking the profit for financial year 2021 (FY21) to 106 crore. This compares favourably with a loss of 10 crore incurred in FY20.

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Further, Haldia Energy Ltd reported a profit after tax of 361 crore for FY21, up 14% year-on-year (y-o-y). On the flip side, Crescent Power & Surya Vidyut’s net profit declined by 15% y-o-y to 22 crore in FY21.

“We have revised our earnings for FY2022E (+7.9%) and for FY2023E (+7%), factoring improved profitability at Dhariwal and lower losses at recently acquired distribution circles," said analysts from Kotak Institutional Equities in a report on 17 June.

“A healthy 45 per share of interim dividend shows the company’s intent to increase the pay-out ratio and right-size the balance sheet," the analysts pointed out. For FY21, CESC has continued its focus on various cost optimization measures to minimize the impact of loss of sales volume during the year because of covid-19.

In general, analysts remained enthused about the turnaround seen at Dhariwal. Investors are now awaiting tariff orders. “The focus remains on the West Bengal Electricity Regulatory Commission order on hiking tariffs, which will improve cash collection," said a report by Antique Stock Broking Ltd on 17 June. “The other catalysts remain winning new distribution franchisees and sweating of renewable assets," Antique pointed out.

Meanwhile, the CESC stock gave up most of the gains seen on Thursday during trading hours and closed just 1% higher by the end of the day. The share trades at around seven times estimated earnings for financial year 2023 based on Bloomberg data, which does not appear too demanding.

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