Shares of power utility giant CESC Limited surged by 5.17% to ₹182 during intraday trading on the BSE. This increase follows the company's announcement that its wholly-owned subsidiary, Eminent Electricity Distribution, has received a Letter of Intent (LOI) to acquire a 100% stake in an electricity distribution company in Chandigarh.
The deal, valued at ₹871 crore, is anticipated to be completed within the next 30 days. This acquisition marks a significant milestone for CESC as it strategically broadens its footprint in electricity distribution and retail supply, reinforcing its growth trajectory. For those looking to invest in stocks, this development highlights CESC's aggressive growth plans and potential future value.
Financial performance in Q2 FY24
CESC Limited’s Q2 FY24 results underscore its strong financial performance. The company reported a 1.4% year-on-year (YoY) increase in net profit, reaching ₹353 crore for the quarter ending September 30, 2024, compared to ₹348 crore in the previous year. Revenue from operations grew by 8% to ₹4,700 crore, up from ₹4,352 crore in Q2 FY24.
Operating performance was robust, with EBITDA soaring by 38.7% to ₹896 crore, accompanied by an improved EBITDA margin of 19%, compared to 14.8% in the same period last year. Regulatory income saw a significant 2.6x increase to ₹689 crore, offsetting higher energy costs driven by elevated fuel and power purchase prices. These results make CESC a noteworthy option for those seeking to invest in stocks in the utilities sector.
Market performance and valuation
CESC shares have delivered exceptional returns over the past year, outperforming the broader market. The stock has gained 30% year-to-date and 82% over the past year, in contrast to the BSE Sensex's 11% and 21% increases during the same periods, respectively.
Currently, CESC has a market capitalisation of ₹23,727.71 crore, trading at a price-to-earnings (P/E) ratio of 30.24 and an earnings per share (EPS) of ₹5.92. At 9:36 AM on Monday, CESC shares were trading 3.44% higher at ₹179 apiece, while the BSE Sensex was up by 1.48%. This robust market performance positions CESC as a compelling choice for individuals aiming to invest in stocks with strong growth potential.
The strategic importance of the Chandigarh acquisition
The planned acquisition of the Chandigarh electricity distribution company aligns with CESC's long-term strategy of strengthening its presence in India's energy distribution sector. As the flagship company of the RP-Sanjiv Goenka Group, CESC already has a dominant role in power generation and distribution across Kolkata, Howrah, Hooghly, and surrounding areas, spanning 567 square kilometres. With three operational power stations boasting a combined capacity of 1,125 MW, the company is well-poised for further expansion.
This move not only enhances CESC's geographical reach but also positions it as a key player for those considering investing in stocks in the energy sector. Such acquisitions demonstrate the company's commitment to sustained growth and market leadership.
Why CESC is a top pick for investors
CESC's strategic acquisitions, robust financial performance, and strong market presence make it a prime candidate for those looking to invest in stocks with solid growth potential. The company's consistent earnings, combined with its ability to adapt to market challenges, reflect a promising outlook. For investors eyeing opportunities in the utilities and energy sector, CESC's stock offers a balanced mix of stability and growth potential.
By diversifying its operations and pursuing ambitious expansion plans, CESC continues to solidify its position as a market leader, ensuring value for its stakeholders.
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