Buy Tata Power; target of Rs 500: ICICI Securities

ICICI Securitie's research report on Tata Power

Tata Power’s adjusted profit came in at INR 10bn, +31% YoY. It reported improved performance largely on account of a) Mundra (in Gujarat) operating on cost plus under emergency clauses, b) sharp improvement in contribution from Tata Projects and c) coal continuing to be a drag due to weakness in international coal prices.

Outlook

Tata Power’s adjusted profit came in at INR 10bn in Q1FY25 (vs INR 7.4bn in Q1FY24) aided by a) improved operational and financial performance of Mundra, b) improvement in Tata Projects (associate income) offset by continued weakness in gross spread of coal impacting its Indonesian mine’s performance. Mundra reported availability of 81% (vs 54%) and utilisation of 71% (vs 41%). In Q1, it won: a) Supply of 0.6GW module from its new facility, b) new transmission project with cost of INR 25bn. However, there was no accretion in a) pipeline of renewables asset and b) EPC orderbook was stagnant at INR 132bn. We expect near-term earnings to be driven by earnings from solar manufacturing and solar rooftop. Maintain BUY with SOTP-based TP of INR 500/share.