CESC's reported PAT was significantly lower than our estimate led by lower revenue recognition/fixed charge recovery due to lower demand, given the severe winter season. Also, the tariff hike accounting in 3QFY13 is deferred to 4Q, as truing up order is finalized post December. Management retained its guidance of PAT increase by INR300-350m in FY13 on a full year basis, over FY12 PAT.
Total number of units sold during the quarter was 1,961MU, down 2.2% YoY, due to lower demand (at 2.2BUs, down 2.9% YoY) due to severe winter. This impacted volume growth, which in turn had a bearing on the recovery of fixed charges for CESC.
For 9MFY13, Spencer's average revenue growth stood at 13% YoY, while same stores sales grew by robust 16% YoY. Also, stores level EBITDA stood at INR51/sq.ft/month in 3QFY13. This is however marginally lower than INR57/sq.ft/month in 2QFY13, despite the festive season in 3Q.
CESC completed the open offer for First Source Ltd (FSL), which saw tendering of ~7.4% stake by shareholder. This takes the total stake in FSL to 56.8% and total investment commitment at INR4.5b. This is proposed to be financed through a mix of debt (INR3b) and equity (INR1.5b).
We expect CESC to report standalone net profit of INR5.8b in FY13E (up 4.6% YoY) and INR6.5b in FY14E (up 11.6% YoY). Stock quotes at PER and P/B of 6.1x and 0.7x FY14E on standalone basis. Buy.