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

Save Tax With Mutual Funds

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       Mutual funds are ideal as long term investment avenues for retail investors. To encourage investments in this avenue, the Government of India offers investors a spate of tax benefits thus ensuring maximum benefit from mutual funds held beyond a year. Sample some of the key benefits and refer to the table for a detailed list of tax rates for different types of schemes ·        Avail deductions under Sec 80C of the Income Tax Act by investing up to a maximum of Rs. 1 lakh in designated Equity Linked Savings Schemes (ELSS). Such investments have a compulsory lock in period of 3 years. ·        First time retail investors in equity with a gross total income of up to Rs. 12 lakh can invest up to Rs. 50,000 in specific MF schemes un...

How much to invest in gold ?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) Let your motivation dictate the share of the yellow metal in your portfolio Enough has been said and written about gold as an investment option. The latest argument is that the craze for gold among Indian households is endangering our country's balance of payments. The policymakers are busy trying to find ways of discouraging investment in gold, but if households keep the common good in mind, they would be paying the market price for gas cylinders as they do for, say, their mobile phone bills. After all, private decisions are driven by private motives. So, how should a household look at gold from its own perspective? Gold is primarily acquired for its merit as a store of value. Even if the worst crisis hits a family, the gold that it holds could be put to use anywhere in th...

Buying a Used Car

Invest in Mutual Funds Online Download Mutual Fund Application Forms   Pre-owned car can make sense in these inflationary times. But buying one can be trickier than getting a new vehicle    If you are thinking of buying a car but are worried about the rising inflation and higher EMIs eating into your budget, you should consider buying a used car. For those learning to drive, the general advice is that they should hone their driving skills in a used car. However, buying a used car is not an easy task. Though a used car costs less, there are a lot of aspects to be considered while buying one. You should do your due diligence before buying such a car. For example, two cars of the same model would carry two different prices. The difference in price could be on account of the age of the car, how many people have driven, etc. First Fix Your Budget Since used cars are available in a wide variety of models and prices, the starting point would be to determine your budget befor...

Debt Mutual Funds Best Fixed Income Investments

Debt Mutual Funds - Invest Online     In the last one year, except for a select few sectoral funds and small cap funds, not many of the equity funds have given great returns. On the other hand, debt funds have done relatively well in terms of returns. So far in the new year too, the stock market has been extremely volatile, pushing investors to look for safer havens. In this context, debt funds are looking safer bets for those investors who do not have the appetite for higher level of volatility. Investors who look for a regular income stream, also look at fixed income products like debt funds, bank fixed deposits and post office monthly income schemes.  Among the fixed income products, debt funds score over others because of chances of higher return, has nearly similar level of risks and liquidity. According to Shah, people looking for regular income could opt for a systematic withdrawal plan (SWP) in debt funds , which, if done judi ciously could also save on taxes. Shah explaine...

Diversification is key to gain more

Even those who prefer debt for its safety are looking at more options    It is not often that you find more than a couple of asset classes producing good returns at the same time. Invariably, assets such as gold and equity don't perform in tandem, and hence it was easier to allocate to them in line with the risk profile of the investors. In the last couple of quarters, however, more than one asset has turned attractive - gold, debt and equity. In line with the trend, you even have monthly income plans with a combination of more than two assets.    In the past, those who stuck to debt were a different class of investors who didn't wish to take risk with their money. The changing lifecycles and the growing integration of investment markets across the globe have pushed even individual investors to embrace the concept of asset allocation. Hence, you have individuals who were using debt to park profits being prepared to take advantage of other assets.    For instance, when 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