Buy Tata Power Company; target of Rs 285 Sharekhan

Sharekhan's research report on Tata Power Company

Q2 consolidated PAT grew by 9% y-o-y to Rs. 1,017 crore led by a strong growth from RE portfolio and Odisha discoms offsetting lower coal profits. TPSSL saw strong order execution and rise of 392 bps q-o-q in EBITDA margin with PAT growth of 6.7x q-o-q to Rs74 crore. RE generation/Odisha PAT was also up 20%/45% y-o-y. Mundra UMPP is PAT break-even. Mundra UMPP would operate under Section 11 of the Electricity Act till June24. 4.3GW solar cell & module plant achieved first module out (FMO) in Oct‘23 and cell production expected in Q4FY24. This would address concern of supply chain and input cost for solar plants.

Outlook

Tata Power has a well-planned strategy to shift towards clean energy and targets for 4x rise in its PAT by FY2027E over FY2022. We maintain a Buy on Tata Power with a revised PT of Rs. 285. At CMP, the stock trades at 2.3x/2.1x FY25E/FY26E P/BV.

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