CESC (CESC IN) – Company Update – Valuation at 1x BV and dividend yield of 5% – BUY
Published on 28 Oct 2026
We retain our BUY rating on CESC with an SOTP-based target price of INR 204. Following the recent correction, the stock trades at ~1x FY29E BV, in line with its 10-year historical average, with an ROE of 12-13%. At the current market price, the stock offers an attractive dividend yield of ~5%. CESC’s diversified power business, anchored by its cash-generative distribution franchise and integrated generation assets, provides stable earnings visibility, while renewables represent the next leg of growth. The distribution business contributes ~60% of PAT, supported by improving T&D losses across newer franchises, while coal-based generation contributes ~40%. The company plans to scale up its renewable capacity from 0.4GW in Q1FY27 to 4.5GW by FY29, with PPAs already secured for 4.3GW, providing strong revenue visibility. We expect EBITDA CAGR of ~15% over FY26–29E, while EPS CAGR is estimated at ~6%, as the ramp-up in renewable capacity is expected to contribute meaningfully to earnings from FY30E. Key stock catalysts include the expected completion of the Renew acquisition by mid-November 2026, commissioning of the transmission line for 400MW of renewable capacity in Q4FY27, and a potential reduction in Malegaon T&D losses in Q3/Q4FY27.
