Feb 15, 2017 05:16 PM IST | Source: Moneycontrol.com

Buy Tata Power; target of Rs 85: Edelweiss

Edelweiss is bullish on Tata Power has recommended buy rating on the stock with a target price of Rs 85 in its research report dated February 13, 2017.

Buy Tata Power; target of Rs 85: Edelweiss

Edelweiss' research report on Tata Power

Standalone recurring EBITDA stood at INR 5.7bn. Other expenditure increased due to one‐off impairment of INR 650mn at Naraj Marthapur project. Also previous year’s EBITDA was bloated due to reversal of disallowance of INR 850mn. Adjusting for this, Q3FY17 adjusted EBITDA dipped by 7% YoY. Among other businesses, the coal business in Indonesia sprung positive surprise reporting net income of INR 2.4bn (41% of consolidated profits) as the company’s share of profit.

Outlook

We maintain our estimates and reiterate ‘BUY’ with TP of INR 85. However, FY17E gross debt: equity at 2.4x remains a challenge. For us, the key trigger remains the Supreme Court’s ratification of the CERC compensatory tariff recommendations. Even otherwise, looking at coal index, tariff escalations for Mundra project next year could recoup 50% of the losses.

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