Analysts positive on Tata Power post Q2, Mundra resolution key

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26 Aug, 2025 12:21

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Buoyed by its Q2 results, most brokerage houses remain positive on Tata Power Company and expect 7-26 per cent upside in the stock.

The stock reacted positively to the company's earnings on October 29, rallying 12 per cent at close. It was quoting at Rs 78.50, up Rs 1.00, or 1.29 per cent on the BSE, at 11:14 hours IST.

While maintaining overweight call on the stock with a target price at Rs 94 per share, Morgan Stanley said revenues were marginally below estimate because of solar manufacturing.

Tata Power has added 301 MW in first half of FY19 and has won new bids of 400 MW.

Cash profit generation in second half of FY19 should aid net debt reduction and regulatory approvals for defence biz should take another six months, it added.

Tata Power's Q2 profit grew 85.1 per cent on year to Rs 393.4 crore due to low base in year-ago period.

Profit in the corresponding period last fiscal stood at Rs 213 crore, which was impacted by impairment in respect of other property, plant and equipment and goodwill (Rs 35.63 crore) and damages towards contractual obligations (Rs 113.17 crore).

Revenue from operations during the quarter grew by 6.7 per cent to Rs 7,332.6 crore compared to same period last year.

Nomura has maintained buy call with a target price at Rs 98 per share, saying the prospects of an eventual tariff relief in Mundra boded well.

If proposed tariff relief for Mundra comes through, it could add Rs 4-4.50 per share of EPS, it said, adding earnings growth outlook is healthy.

Impetus to reduce leverage by monetising non-core investments is largely intact, it believes.

In a relief to company, the Supreme Court (SC), on October 28, allowed state distribution companies (Discoms) and power producers to move Central Electricity Regulatory Commission (CERC) to amend the power purchase agreement (PPA) as per the recommendations of the high-powered committee.

Deutsche Bank feels Mundra resolution could lift value by Rs 7,000 crore or Rs 26 per share, and value unlocking & deleveraging will be the key triggers. The research house also has a buy call with a target price at Rs 98.

Axis Capital also rated buy on Tata Power with a target price at Rs 90, saying power purchase agreement revision will be rerating catalyst while CLSA recommended buying the stock with a target at Rs 96.

HSBC, which has hold rating and increased target to Rs 84 from Rs 78 earlier, said Supreme Court ruling improved probability of some relief on losses for its Mundra project, but Q2 earnings were non-event. "While deleveraging effort & recovery for sale of Arutmin continues, relief from Mundra will set pace of growth."