Buy This Good Dividend Paying Stock For Potential Upside Of More Than 36%: Emkay Global Financial

Emkay Global Financial has given a buy call for the mid-cap company from the Electric sector. The brokerage firm has given a target price of Rs. 108 for Calcutta Energy Supply Corporation (CESC) Ltd.

The price of the stock is currently in a downtrend, and it is 23.5% away from its 52-week high, but the latest report of Emkay Global suggests the stock is looking in a good position, and it can give a potential upside of more than 36% from the current market price crossing its 52-week high.

Outlook of the Calcutta Energy Supply Corporation Ltd (CESC)

The RP-Sanjiv Goenka Group's CESC (Calcutta Energy Supply Corporation) Limited is one of its main businesses. In the 567 square kilometers of its licensed area in Hooghly, Howrah, Kolkata, North, and South 24 Parganas in West Bengal, it is involved in electricity distribution with embedded generation.

About 3.3 million people receive their electricity from CESC, which is safe, economical, and reliable. The company operates in many other parts of India, including Rajasthan, Noida, and Malegaon in Maharashtra.

Outlook of Calcutta Energy Supply Corporation Ltd Stock

Calcutta Energy Supply Corporation Ltd is a dividend stock considered a good consistent dividend-paying stock by investors. CESC is a mid-cap company with a market capitalization of over Rs. 10,386 Crores, and the stock is currently trading at Rs. 78.4.

The Return On Equity and Return On Capital Employed of the company are 13.4% and 12.8%, respectively, which is average. However, the stock's dividend yield is 5.72%, with a dividend payout ratio of 44.1%.

Valuation Outlook of CESC Ltd.

As mentioned in the latest report of Emkay Global Financial, "We highlight that Kota witnessed a ~17% decline in its sales in FY21 due to Covid. Although FY22 reported 11% growth, sales in FY22 at Rs8bn remained below FY20 levels (Rs8.7bn). It is important to note that FY22 T&D loss levels were brought down to 19.2% from 20.4% in FY20, indicating better operational efficiency. During Q1FY23, Kota circle witnessed 17.5% demand growth, and various media articles of Q2 suggest an uptick in demand as students have returned to India's coaching capital."

Buy Call of Emkay Global Financial On CESC Ltd

"We believe the improvement in the performance of Kota circle, Noida Power, and Dhariwal IPP will lead to decent earnings growth in FY22, which was missing in the past two years. We maintain our BUY rating with March '23 Target Price of Rs 108," said Emkay Global in the latest report.

And summarizing the report in one headline, Emkay Global Financial mentioned, "T&D loss remains key for the profitability of distribution franchisees."

However, one possible risk mentioned in the report is "Higher T&D loss levels and lower demand growth."

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