Tata Power, JSW Energy stocks get buy call from Nomura; up to 32% upside seen amid strong outlook

In the 12 months gone by, JSW Energy has rallied 65 percent and Tata Power has surged 79 percent, outperforming Nifty's returns of 27 percent during this period.

Shares of Tata Power and JSW Energy inched higher on October 8 as Nomura initiated coverage on the power sector with optimistic recommendations for both stocks.

For Tata Power, Nomura has set a 'buy' rating with a target price of Rs 560, projecting a robust 16 percent compound annual growth rate (CAGR) in EBITDA over FY24-27.

The key drivers behind this growth are expected to be a doubling in the company’s renewable energy capacity and strong execution of its Rs 15,700 crore solar EPC order book, the brokerage said. Additionally, Tata Power's Odisha operations are anticipated to see a significant boost in profitability.

Similarly, JSW Energy has also received a 'buy' rating, with Nomura setting a target price of Rs 885. The brokerage expects JSW Energy to deliver an impressive 38 percent EBITDA CAGR over FY24-27.

This growth is likely to be fueled by a more than 2x increase in operational capacity, alongside healthy margins from its renewable energy generation projects, analysts said.

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Nomura is not the only brokerage that is bullish on power. Last month, Motilal Oswal also initiated coverage on five power companies, Power Grid, NTPC, Tata Power, JSW Energy and IEX, where it expected potential upsides of up to 24 percent over the next one year.

The domestic broking firm expects a multi-decade investment opportunity worth Rs 40 lakh crore in the Indian power sector with generation, transmission and smart metering accounting for 86 percent, 10 percent and 4 percent of the total spending respectively.

Motilal Oswal cited accelerating power demand, the need to upgrade or replace the old power infrastructure as the electricity mix undergoes a shift and the transition to cleaner sources of energy, given India's target of 500 GW in Renewable Energy capacity by 2030 as the factors behind its thesis.

At 9:28 am, Tata Power was trading a percent higher at Rs 445 and JSW Energy was also up at around Rs 679.50 on the National Stock Exchange (NSE). So far this year, the stocks have risen 35 percent and 67 percent, respectively. In comparison Nifty rose 14 percent.

In the 12 months gone by, JSW Energy has rallied 65 percent and Tata Power has surged 79 percent, outperforming Nifty's returns of 27 percent during this period.

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