Skip to main content

Stock Review: CESC


RPG Group's power flagship CESC will continue to record robust growth in power business in the near term despite a rise in input cost, analysts and industry experts said. Its retail unit Spencer's Retail, which has seen losses declining over the past few months, will be one of the major contributors to future earnings. The unit is likely to take another two years to break even, a company official said.


While the power business contributes 80% to the company's total revenue, the rest comes from retail. The power business posted a net profit of . 488 crore in the financial year ended March, while retail operations recorded an operating loss of . 200 crore. Power operation offers a 15% return-oncapital and retail operates at a gross margin of 18%.
Rise in raw material cost, including coal, will not have much impact on the company's margins, going ahead as it has ample scope to pass it on to customers, said analysts. The company needs 6 million tonnes (mt) coal per annum for power generation, of which 3 mt comes from its coal captives, 2.5 mt from Coal India, and rest from imports. CESC recently acquired an 11.6% stake in an Australian resource generation firm that will also contribute to its future coal requirement.


In the past two years, the company has been earning a return-on-equity of 20-21%. It has two capacity-expansion plans in the pipeline for power segment, including a 600-mw plant at Chandrapur (to be commissioned by FY13) and a 600-mw project at Haldia (to be commissioned in FY14).


The company has planned a capital expenditure of about . 6,000 crore for the plants at Chandrapur and Haldia. Of the total capex, 25% will be funded via equity. It has already invested . 700 crore and another . 800 crore, which can be funded via cash available on books, will be invested over the next three years. The company's management said that there is still time to figure out funding of further expansion. Its current debt-to-equity ratio is 0.7. In the retail business, the company will add 2.5 lakh square feet to the existing 9.5 lakh square feet.


At the current market price of . 338, the stock trades at 8.7 times its FY11 earnings.
With upcoming capacity enhancements and an expected drop in losses from the retail unit, CESC is expected to fare well in the next few years.

Popular posts from this blog

Real Returns in Investing

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Real Returns in Investing     A Anil Singh (name changed), 44, works with a private company and believes in investing his entire savings in fixed deposits. His financials from the year 2000 till date is given in the table. Anil's savings in FDs gave him an average return of around 8%. The total amount saved over the 174 months (From January 2000 to June 2014) is Rs 49.80 lakh. The value of his investment today is around Rs 66.71 lakh. Naveen Singh (name changed), 44, works in a similar profile like Anil. However his expenses were on the higher side. His financials are as in the table. Naveen invested only in equities. The total amount saved over the 174 months (From January 2000 to June 2014) is Rs 38.40 lakh. The v...

Budget 2014 Highlights for Saving

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   The new finance minister Arun Jaitley has just presented his first budget. What measures does the budget contain that will specifically impact savers and investors? Here they are: 1. Housing loans exemption for self-occupied properties increased to Rs2 lakh: Earlier this amount was Rs1.5 lakhs. This move barely keeps pace with the inflation in asset values.   2. Investment limit under 80 (C) increased to Rs1.5 lakh: This is a good move again and offers some relief to taxpayers.   3. IT exemption increased to Rs2.5 lakh, Rs3 lakh for senior citizens. This comes as a minor relief for taxpayers.   4. Annual PPF ceiling to be enhanced to Rs1.5 lakh, from Rs1 lakh: This is in tune with the change in 80C.   5. Long term capital gains tax for debt funds has been rai...

ICICI Prudential MIP 25 - Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential MIP 25     (CRISIL Rank 2)   This scheme was launched March 2004. Please see the chart below for the one, two, three and five years annualized returns from this scheme. The minimum investment in the scheme is Rs 5,000. The asset allocation of the portfolio is 24% equity, 72% debt and 4% cash equivalent and others. Please see the chart below for the monthly dividends declared by the scheme, on a per unit basis, over the last 5 years.   For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mai...

Franklin India Smaller Companies Fund - Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Franklin India Smaller Companies Fund   While the universe of small-cap stocks in India is vast, there are very few equity funds which take on the task of sifting through this space for good long-term bets. Franklin India Smaller Companies Fund has managed this with aplomb. What we like about this fund is its significant out-performance of its category and benchmark over the last four years, and its ability to moderate portfolio risk despite investing in the riskiest segment of the equity market. This fund's stock selection strategy, like that of Franklin India Prima Fund is focused on finding companies that generate positive cash flows across business cycles. High return on investment and manageable leverage are also filtering criteria. Says R. Janakiraman, fund ma...

How to open a Capital Gains Account?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   How to open a Capital Gains Account? You can open a capital gains account in an authorized bank. The Government has notified 28 banks which can open the Capital Gains Account on behalf of the Government. You have to apply for opening the account by filling out the required application form (Form A) and submit proof of address, PAN card and photograph. You cannot withdraw funds from a capital gains account using a cheque book or ATM, like you do in your normal savings bank account. There are procedures to be followed to withdraw funds from the capital gains account. Investment in Specified Bonds Section 54EC of Income Act provide that if the seller invests whole or part of capital gains arising from the sale of asset in specified Capital Gains, within a period of six months of the ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now