Reduce CESC, target Rs 970: Elara Capital

Elara Capital has a reduce call on CESC Ltd. with a target price of Rs 970. The current market price of CESC Ltd. is Rs 1046.0. Time period given by the brokerage is a year when CESC Ltd price can reach the defined target. CESC Ltd., incorporated in 1978, is a large-cap power company with a market cap of Rs 13783.94 crore.

Investment rational by Elara Capital
Upgrade to Reduce with a new TP of INR 970 We cut our EPS by 5% in FY19E primarily on losses in FMCG, distribution, Dhariwal plant partly offset by higher parent profit. But, we have raised our TP by 7% to INR 970 as we roll forward by a quarter (DCF method with 13.5% COE for generation, retail asset with 16% COE [implied value/sales at 0.7 FY20E]). We upgrade to Reduce from sell as the stock trades at 1.0x FY20E P/BV. Watch for turnaround at Chandrapur, retail business and listing of four entities, post the regulatory approval, possibly by Q2FY19.