ICICI Securities Recommends Buying CESC Stock with a Price Target of Rs 220

CESC Reports Strong Q4FY26 Earnings, Outlines Ambitious Capex Plan

Indian energy company CESC has reported a strong set of financial results for the fourth quarter of fiscal year 2026, with its earnings before interest, taxes, depreciation, and amortization (EBITDA) increasing by 23% year-over-year to INR 12 billion. The company's profit also saw an 18% year-over-year growth, reaching INR 4.4 billion.

The significant growth in CESC's financial performance can be attributed to two key factors: the acquisition of the Chandigarh distribution business and the establishment of a new power tie-up at Chandrapur thermal power plant, which took effect in April 2025 and is set to last for two years. However, the company still faces a delay in the issuance of tariff orders, which has resulted in a continued build-up of regulatory assets. Despite this, CESC has managed to recover a portion of its fuel and power purchase costs, accounting for 8% of the tariff, thereby arresting the growth of these assets.

The regulatory assets, which remain substantial at INR 46 billion, continue to pose a challenge for the company. Nevertheless, CESC's financial performance remains robust, and the company is well-positioned to take advantage of growing opportunities in the energy sector.

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Outlook: CESC Embarks on Ambitious Capex Plan

CESC has outlined an ambitious capital expenditure plan, with a total of INR 320 billion allocated for various projects. A significant portion of this plan, INR 230 billion, will be dedicated to the development of renewable energy generation capacity. In line with this strategy, the company has added 800 MW of power purchase agreements (PPAs) in the fourth quarter and has secured new bids for 550 MW. Furthermore, CESC is looking to invest in its distribution assets and solar manufacturing capabilities.

Recommendation

In light of CESC's strong financial performance and ambitious capex plan, we maintain a BUY recommendation with a target price of INR 220, up from INR 204 previously.

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Note: The above table presents a comparison of CESC's Q4FY26 EBITDA and profit growth with the previous year.