ICICI Securities has maintained BUY recommendation on CESC, with an ambitious target price of Rs 204, implying an upside potential of approximately 33% from the current market price of Rs 153 as of September 9, 2025. The equity research report underscores CESC’s aggressive Growth Vision 2030, targeting a doubling of profits by FY30 through a strategically allocated capex of Rs 320 billion. This capex prioritizes renewable energy generation, distribution assets, and solar manufacturing. The company’s thrust on expanding its renewable energy capacity to 3.2GW by FY29 and bidding aggressively for privatized DISCOMs, especially in Uttar Pradesh, forms the backbone of this growth narrative.

Robust Growth Vision 2030 with Heavy Capex Commitments

CESC’s management disclosed a comprehensive plan at its recent investor day, emphasizing a bold investment agenda over the next five years, with Rs 230 billion dedicated to renewable energy (RE) generation, Rs 60 billion earmarked for distribution assets, and Rs 30 billion slated for solar cell and module manufacturing. This strategic capital deployment aims to transform the company into a fully integrated energy powerhouse, leveraging synergies across generation, distribution, and manufacturing verticals.

The company’s core ambition is to double its profits by FY30, driven notably by three levers:

Augmentation of renewable capacity to 3.2GW under Phase 1.

Distribution asset enhancement with focused capex and cost rationalization.

Expansion of solar manufacturing capacity targeting 3GW of cell and module output.

Distribution Business: Growth Through Asset Expansion and New Bids

CESC envisages its DISCOM assets generating Rs 16 billion in profits by FY30, nearly doubling from Rs 8.4 billion in FY25. This expected growth stems from several factors, including:

Incremental capex at Kolkata DISCOM for regulatory asset clearance and efficiency gains.

Anticipated 1.5x demand growth in the Noida license area.

Recent acquisition of Chandigarh DISCOM with planned capex to replace aging infrastructure.

Operational turnaround at Malegaon, projected to break even by FY29.

Aggressive pursuit of new DISCOM bids, particularly in Uttar Pradesh, where privatization efforts offer lucrative opportunities.

Privatization of UP’s PuVVNL and DVVNL, comprising 17.6 million customers with an annual consumption of 55 billion units, presents a significant expansion runway despite the challenge of currently over 30% AT&C losses.

Renewable Energy: Pioneering India’s Energy Transition

CESC is positioning itself as a renewable energy leader by targeting a 3.2GW capacity by FY29 under the first phase with a projected EBITDA in excess of Rs 20 billion. Key highlights include:

1.2GW of renewable capacity already under construction, split between wind (1.7GW) and solar (1.5GW) projects.

Signed Power Purchase Agreements (PPAs) for 1.2GW of renewables with secured transmission capacity of 3.8GW and applications for an additional 4GW.

Strategic partnerships with prominent EPC and turnkey suppliers such as Inox Wind, Suzlon, Envision, Waaree, and Sterling & Wilson.

Vision for 10GW renewable capacity by FY32, aiming to capture a significant share of India’s green energy market.

Planned integration of Battery Energy Storage Systems (BESS) of 80Mwh in Kolkata and Noida to optimize grid management.

Solar Manufacturing: Vertical Integration to Boost Margins

In an effort to capture value along the solar value chain, CESC plans to establish solar cell and module manufacturing with a capacity of 3GW each by FY28, backed by Rs 30 billion in capex. The company will deploy advanced TOPCon technology to ensure high efficiency in these manufacturing facilities. This vertical integration is expected to enhance CESC’s competitive positioning and margin profile in the rapidly expanding solar sector.

Valuation and Financial Outlook

ICICI Securities employs a Sum-of-the-Parts (SoTP) valuation approach to arrive at the target price of Rs 204. The valuation components include:

Financial forecasts indicate steady topline growth, with net revenue expected to progress from Rs 182,490 million in FY25 to Rs 212,827 million by FY27. EBITDA margins are projected to marginally improve to 23.5% by FY27, while net profit is anticipated to grow at a CAGR of approximately 12%, reaching Rs 16,996 million in FY27. The EPS is forecasted to rise to Rs 12.8, down modestly from cash EPS of Rs 24.3, reflecting underlying capital-intensive operations.

Stock Levels and Trading Guidance

Current Market Price (CMP): Rs 153 (as on September 9, 2025)

Target Price (12-month horizon): Rs 204, implying ~33% upside

Key support levels: Rs 145 and Rs 135

Resistance levels: Rs 165 and Rs 175

Investors are advised to accumulate on dips near support zones while trimming positions closer to the target price. The stock offers a compelling investment proposition via a mix of steady cash flows from legacy DISCOM and thermal assets coupled with skewed growth from renewables and solar manufacturing.

Risk Factors to Monitor

Delay in commissioning renewable capacity could derail growth projections.

Regulatory risks including tariff approvals and potential build-up of regulatory assets.

Execution risks related to distribution capex and new DISCOM acquisitions.

Elevated leverage ratios with net debt-to-equity inching towards 1.7x by FY27, necessitating monitoring of financial discipline.

Bottomline for Investors

ICICI Securities’ reaffirmed BUY stance on CESC is underpinned by a robust multi-pronged expansion strategy aligned with India’s energy transition ambitions. The company’s sizable capex plans, focus on renewables, and distribution business expansion are set to drive profitable growth and deliver shareholder value. Prudence is warranted on execution risks, but at current valuation levels, CESC remains an attractive proposition for investors targeting long-term sustainable growth in the Indian utilities sector. This call materializes as a strategic opportunity to position ahead of transformative developments in the power sector.