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Stock markets had a rough year just about everywhere. Photo: iStock
Stock markets had a rough year just about everywhere. Photo: iStock

CESC stock rises on higher dividend payout, decent Q3

The electrical distribution co reported a 25% increase y-o-y in consolidated net profit to 328 crore

Shares of CESC Ltd rose by about 5% in the past two days. A couple of factors are contributing to the positive sentiment. On Wednesday, the company, engaged in electrical distribution with embedded generation facility, announced an interim dividend of 45 per share. This is better than expectations. Analysts from Motilal Oswal Financial Securities Ltd said the dividend indicates payout ratios of about 50% (versus 20–25% historically), significantly higher than the broking firm’s estimate of 23 per share for FY21.

“This is a positive surprise and highlights the company’s willingness to return excess cash to shareholders," Motilal Oswal analysts wrote in a report on 13 January.

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Additionally, its December quarter results announced on Wednesday during market hours were decent.

playing catch-up
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playing catch-up

Consolidated net profit increased by nearly 25% year-on-year (y-o-y) to 328 crore at a time that standalone net profit growth was much slower at around 3%. However, the standalone performance was in line with the regulated nature of the business, said analysts. Standalone revenues were flattish y-o-y.

On a consolidated basis, strong growth in other income helped profits. Subsidiaries have also performed well, contributing to the consolidated profit growth. The turnaround at its 600MW Chandrapur project was particularly noteworthy.

“Chandrapur reported profit after tax of 28 crore in the December quarter (versus loss of 15 crore y-o-y) and 75 crore in 9MFY21 (versus 64 crore loss y-o-y)," analysts from Emkay Global Financial Services Ltd said in a report on 13 January.

“(This was) largely driven by the extension of the PPA term with Maharashtra discom for 185 MW, short-term PPA for its untied capacity, and recovery of certain duties and taxes from the Noida discom under a change in law," Emkay analysts added. PPA is power purchase agreement.

Despite the increase in the CESC share price in the past two days, the stock is about 10% away from its pre-covid highs seen in January 2020. Valuations aren’t pricey, said analysts. Besides, improving earnings outlook at the Chandrapur unit and moderating losses at franchises augur well.

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