ICICIdirect has maintained 'Buy' on CESC with target price of Rs 825 as against current market price of Rs 620 in its report.

Commenting on the investment rationale, the stock broker said, ''CESC, with an installed capacity of only 1,525 MW and a distribution license across Kolkata and Howrah, has been extremely slow in its capacity addition over the years (1897 - 2014). This, however, shielded the company from various sectoral woes like fuel supply constraints, delayed project clearances, cost overruns, etc, which impacted the earnings and balance sheet of many aggressive players who increased their capacity manifold.

While many private players struggled with a high D/E of over 3-4x, CESC's D/E remained below 2x over the years as its base business operates on a regulated business model (15.5% RoE) and provides a stable cash flow of Rs 5 billion per annum. CESC's capacity will increase to 2,425 MW capacity with the commissioning of Chandrapur (600 MW) and Haldia project (2x300 MW) in FY15.

Chandrapur Unit - 1 has been commissioned and supply of power to TANGEDCO and Tata power, Unit-2 will be commissioned shortly. Haldia will be commissioned by FY16, providing stability to CESC's cash flow. Factoring in Spencer's declining cash losses, we now assign it a positive value. Furthermore, CESC's investment in FSL continues to add value. Accordingly, we value CESC on an SOTP basis and arrive at target price of Rs 825, (upside potential of 33%) and maintain our Buy rating.''

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