CESC - At Deep Discount Versus Peers: ICICI Securities

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ICICI Securities Report

The West Bengal Electricity Regulatory Commission has started issuing tariff orders, which bodes well for CESC Ltd. Kolkata discom’s tariff approval.

With the anticipated issue of the order, and approval of capex incurred in the past three years and of future capex as well, we expect ambiguity in the company’s earnings and valuation to diminish and the stock to re-rate.

Despite its higher profits, return on equity and free cash flow yield, the company currently trades at 52%/70% discount to its private sector peers Torrent Power Ltd./JSW Energy Ltd.’s FY23E price-to-earning.

Of the three main concerns – the pending tariff order, franchise distribution profitability, and growth concerns – two are about to be addressed.

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