UBS initiates coverage on Tata Power, sees 21% upside on energy transition opportunities

Tata Power will invest Rs 20,000 crore capex in FY25, the electric utility company's chairman said.

International brokerage UBS initiated coverage on Tata Power, seeing an upside of 21 percent as Tata Power is embracing energy transitions across dimensions.

UBS issued a target price of Rs 510 on Tata Power, which indicates an upside of around 21 percent from the previous session's closing price.

The are robust opportunities across sectors, especially in the renewables area. Tata Power has strong EBITDA growth for businesses linked to the renewables value chain.

The value chain includes renewable power generation, solar equipment manufacturing, large-scale EPC projects and pumped storage.

Tata Power's share price trades at 3.3x FY26 P/BV and 11.6x FY26 EV/EBITDA. According to UBS, the valuations are reasonable, given the size of the overall opportunities in the renewables spaces and the Tata group company's leadership position.

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Tata Power will invest Rs 20,000 crore capex in FY25, the electric utility company's chairman said on July 16 during its 105th Annual General Meeting (AGM) for the Financial Year 2023-24.

Natarajan Chandrasekaran, in his speech to shareholders, said that the company's robust financial and operational performance is a sign of its commitment towards consistent growth, financial prudence and project execution excellence.

"This is over and above the Rs 12,000 crore invested in FY24. A large part of this will be towards accelerating the Company’s renewable energy portfolio and balance towards Transmission and distribution businesses,” Chandrasekaran said.

The company will also explore participation in Small Modular Nuclear Reactors, once the Government gives necessary permissions apart from new distribution expansion opportunities in other states, as and when these opportunities arise in line with Government policies

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