Buy Tata Power Company; target of Rs 460: Geojit Financial Services

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26 Aug, 2025 12:21

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Tata Power Company Ltd generates and supplies electricity. It constructs and operates independent power plants and specialises in transmission and distribution of electricity. Revenue from operation declined 0.3% YoY to Rs. 15,698cr in Q2FY25, due to an unusually prolonged monsoon that affected consumption patterns and led to muted power demand throughout the quarter. The generation business decreased 13.4% YoY to Rs. 4,309cr, while the renewables business fell 10.8% YoY to Rs. 1,913cr, due to muted demand. However, the transmission and distribution business grew 8.1% YoY to Rs. 10,207cr. Notably, the distribution business performed exceptionally well in Odisha, Delhi, Mumbai, and Ajmer, despite challenges. EBITDA rose 25.9% YoY to Rs. 4,258cr, driven by lower cost of sales. Cost of sales declined 11.4% YoY to Rs. 8,968cr, aided by drop in fuel and raw material consumed costs. Consequently, EBITDA margin rose 560bps YoY to 27.1%. Reported profit after tax increased 7.4% YoY to Rs. 1,093cr, driven by higher EBIDTA.

Moreover, robust capital expenditure plan, cost reduction measures, strategic acquisition and commissioning additional projects in Q4FY25 are expected to drive the long term performance. Therefore, we upgrade our rating on the stock to BUY, with a revised target price of Rs. 460, based on 12x FY26E EV/EBITDA.

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