CESC stock analysis and target price review after Q3 2025 results

CESC Shares: Should You Buy, Hold, or Sell After Q3 Results? Target Prices Explained

CESC Ltd. shares have dropped 17% over the past month, reflecting broader weakness in the BSE Power Index, as noted by Antique Stock Broking. This decline highlights the challenges faced by the power sector, including regulatory changes and rising costs, impacting investor sentiment. Despite the short-term dip, CESC continues to focus on long-term growth strategies.

Q3 Results and Market Reaction

CESC’s Q3 results came in below market expectations, primarily due to higher losses at its Malegaon distribution company (discom). As a result, several analysts have suggested a ‘Hold’ rating on the stock, especially considering its 13% drop in value in 2025.

Antique Stock Broking views CESC as a potential turnaround story, particularly focusing on the Malegaon discom, which currently faces an annual loss of Rs 150 crore. The company is also progressing with the phase 1 commissioning of 1.4GW of power purchase agreements (PPAs).

Key Developments and Targets

CESC has outlined plans to expand its renewable energy capacity by 3.2GW by FY29, with 1.2GW already under implementation. In addition, it has secured a 0.3GW PPA and a 0.9GW Letter of Award (LoA) with its own discoms in Kolkata and Noida.

According to Antique Stock Broking, the target price for CESC is Rs 214, factoring in a 3% dividend yield. The target price breakdown is as follows:

  • 36% contribution from the Kolkata business
  • 25% from the Dhariwal and Halida power plants
  • 18% from renewable energy projects
  • The remaining balance is attributed to franchise discoms, cash, and regulatory deferral income.

The brokerage also notes that CESC stock valuation (Price-to-Book Value or PBV) is attractive at 1.5 times its FY27E Book Value. The stock has fallen 17% recently, in line with the broader weakness in the BSE Power Index.

CESC Financial Performance in Q3FY25

On a consolidated basis, CESC reported a 6.31% year-on-year decline in net profit, with a total profit of Rs 282 crore for Q3FY25, down from Rs 301 crore in the same quarter last year. However, total income increased by 10.78%, reaching Rs 3,657 crore compared to Rs 3,301 crore in the previous year’s corresponding quarter.

Future Plans and Opportunities

CESC is focusing on expanding its renewable energy capacity, with a goal of adding 3.2GW by FY29. Notably, the company has also won a green hydrogen production bid for 10,500 metric tons per year, although this project is expected to take 3–4 years to materialize due to pending land acquisition and offtake agreements.

Additionally, the Kolkata discom has implemented a fuel surcharge adjustment, effectively increasing tariffs by 5.7% in Q1FY25, which should improve cash flow by Rs 500 crore per year starting from FY25.

Analyst Target Prices and Case Scenarios

  • Bull Case: Nuvama’s bull case target price for CESC is Rs 175, which incorporates the recovery of Rs 600 crore annually from regulatory assets (RA), along with the full 3.2GW renewable energy capacity and an assumed 16% return on equity (RoE).
  • Base Case: The base case target price is Rs 166, factoring in a Rs 500 crore annual RA recovery and a more conservative 2GW renewable energy capacity, with an assumed 15% RoE.

Conclusion: Buy, Hold, or Sell?

While CESC’s recent financial results have missed expectations, the company’s long-term growth plans—especially in renewable energy and its efforts to turn around the Malegaon discom—suggest potential for future growth. With its stock currently trading at an attractive valuation and offering a reasonable dividend yield, analysts are generally recommending a ‘Hold’ for now.

For those considering entry points, keep an eye on further developments related to the Malegaon discom and renewable energy projects, which could influence the stock’s performance in the coming quarters.

read more about stock news niftynews

Leave a Reply

Your email address will not be published. Required fields are marked *

Back To Top