CESC Rebounds After Plunge As Brokerages Remain Upbeat

Shares of CESC Ltd. gained as much as 6.6 percent, the most since January, paring some the losses it made in the previous session. The stock had fallen 17.3 percent, the biggest intraday decline since October 2012, due to confusion on shareholding structure after the company’s restructuring announcement.

The company's board announced restructuring of its business into four separate companies. Post restructuring, CESC will have four independently listed companies on the exchanges.

Most brokerages maintained their rating on the stock citing profitable distribution of business for the RP-Sanjiv Goenka Group company in the long-term.

Here's what brokerages said about CESC:

Macquaire Research

• Rating: Outperform
• Price Target: Revise to Rs 1,100 from Rs 658

• CESC's distribution business to witness significant opportunities due to long-pending privitisation.
• See Spencer's trading at 1.2 times EV/sales which is a 20 percent discount to the lowest multiple in the retail sector.
• Increased FY18 earnings per share by 22 percent.

CLSA

• Rating: Buy
• Price Target: 829.80

• Raised earnings per share estimates by 8-9 percent.
• See CESC as a key power reform play as India opens up distribution sector.
• Post restructuring, CESC could be the only listed discom
• Reduction in losses at Chandrapur plant would boost Haldia Energy's earnings.

JPMorgan

• Rating: Overweight
• Price Target: Rs 1,010

• Expect the deal to be value-accretive.
• Expect CESC to improve free cash flow generation substantially.
• Power business likely to grow 9 times in FY19
• The company is likely to benefit after receiving dividend income from FirstSource and Kolkata retail mall.

Emkay

• Rating: Accumulate
• Price Target: Rs 894

• Incremental power purchase agreement for Chandrapur plant seen as value accretive.
• Revised earnings estimate target by 11.2 percent for FY18-19.
• Expect Spencer's to add 2 lakh square feet space each in FY18 and FY19.