CESC Net Up 5%

Kolkata based CESC has reported only 1% rise in the revenues to Rs 1419 crore. The net profit of the company rose just 5% to Rs 131 crore. CESC has said that the poor power demand in the region has impacted its results negatively. The company has also received shareholders nod to delist its shares from the London stock exchange.

The June quarter results of the power companies remain better than the rest of the year due to the high power demand owing to the summer and hence CESC’s result has surprised us. During the quarter, the company has reported rise in the EBITDA margins. Its EBITDA margins for the quarter were at 22.35% against 20.42% in the corresponding quarter last fiscal. The rise in the EBITDA margins is mainly due softness in material cost and fuel cost which have declined by 8% and 9% respectively on year on year basis. Both of these costs collectively form 55% of its total costs and hence the impact is seen positively on the margins. The quarter however has seen employee costs and other expenses rising by more than 20% each.

On the non operating side, its other income has declined from Rs 21 crore in the corresponding quarter last fiscal to Rs 19 crore in Q1FY14. Finance cost has increased by 15% to Rs 90 crore. The interest cover ratio however remains healthy at 2.9x. The tax rate for the quarter has remained at 21%.

Post the steep underperformance due to the Firstsource acquisition last year, the shares have surged 23% in the last four months. We believe that the stock may show some volatility going ahead.