Prabhudas Lilladher Advocates Buying CESC, Sets Target Price of Rs 216

CESC Delivering Strong Earnings Recovery

Prabhudas Lilladher's Research Report Highlights

CESC has reported a strong close to FY26, with consolidated Profit After Tax (PAT) growing 13% year-over-year (YoY) to Rs 16.2 billion in FY26 and 18.9% YoY to Rs 4.6 billion in Q4FY26. This marks a significant re-acceleration from the low single-digit PAT Compound Annual Growth Rate (CAGR) of the past 3-5 years.

The company's Kolkata distribution business achieved an all-time low Transmission and Distribution (T&D) loss of 6.11% in FY26, while Malegaon's T&D losses improved by approximately 340 basis points to 36.3% in FY26. These improvements reflect the sustained impact of loss-reduction initiatives across the franchise.

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Regulatory income for FY26 stood at Rs 9 billion (consolidated) compared to Rs 12.5 billion in FY25, still lower on a full-year basis.

Renewable Energy Focus

CESC's subsidiary, Purvah Green, continues to target 3.2 GW by FY29E and has recalibrated addition plans for FY26-28E. The company has incurred capex of Rs 40 billion for the under-implementation pipeline of 2.4 GW, with 300 MW currently in the commissioning stage.

Outlook and Recommendation

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The stock currently trades at 1.7x Price-to-Book Value (PBV), given the earnings trajectory and renewable optionality. Despite the regulatory income decline, Prabhudas Lillaher maintains a BUY recommendation with a revised SoTP-based target price of Rs 216 (earlier Rs 204). The revised target price factors in higher valuation for Kolkata discom (improved demand, capex, and faster recovery of regulatory asset) and revised renewable addition plans.

Key catalysts accelerating execution in the renewables business and potential discom privatisation wins remain a focus area for the company.