The company holds a strong position in the power sector and boasts impressive historical growth, current valuation concerns and macro/microeconomic headwinds warrant a cautious approach.
Current Status (Jan 1, 2024):
CMP: ₹132.50
Market Cap: ₹17,555 Cr
Sector: Power Generation & Distribution
Key Products/Services: Electricity generation, distribution, and trading
Financial Overview:
Strengths: Strong revenue growth (9.31% YoY), high ROE (8.34%), low debt-to-equity (1.22), consistent dividend payout
Weaknesses: Profit growth lagging behind revenue (1.78% YoY), relatively high PE ratio (12.13), employee and interest expenses impacting margins
Micro/Macroeconomic Factors:
Positives: Growing energy demand, renewable energy push, government electrification initiatives
Negatives: Rising coal prices, potential regulatory interventions, economic slowdown concerns
Future Predictions:
Mid-term Price Target (1-2 years): ₹150-165 based on potential market correction and stabilizing factors.
Long-term CAGR (5-10 years): 8-10% assuming smooth industry growth and successful adaptation to evolving energy landscape.
Historical Growth and Volatility:
CESC 5-year CAGR (Revenue & Profit): 9.31% & 1.78% respectively
CESC 10-year CAGR (Revenue & Profit): 4.8% & -0.74% respectively
Nifty 5-year CAGR: 12.50%
Nifty 10-year CAGR: 14.00%
CESC Beta: 1.11 (higher than Nifty, indicating higher volatility)
Daily Chart Trend: Currently in a consolidation phase, testing resistance levels.
Investment Recommendation:
Hold: Existing investors can hold with a long-term perspective, considering the company's fundamentals and growth potential.
Cautious Buy: New investors might wait for a price correction or more clarity on macroeconomic factors before entering.
Sell: Investors with short-term risk aversion may consider selling due to potential valuation headwinds.
In conclusion, CESC India presents a mixed bag of opportunities and risks for investors. While its strong historical growth, solid financial fundamentals, and potential benefit from macro trends like rising energy demand paint a promising picture, current valuation concerns, high volatility, and potential headwinds raise caution.
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