Shares of Tata Power Company, the electricity distribution arm of the Tata group, declined on Wednesday’s trading session, August 7. The stock was down around 2%, following the company’s modest 4% year-on-year growth in net profit for the June 2024 quarter.
The shares had opened positively at Rs 444 apiece on the National Stock Exchange (NSE), 1.6% higher than the previous session’s close. However, minutes into the trade, the shares began to slide.
By 1:22 pm, the stock was trading at Rs 427.95 apiece on the NSE, down 2% from the last closing price. On the BSE, the decline was sharper, with Tata Power trading 2% lower at Rs 428 per share.
Brokerages on Tata Power
Both CLSA and Jefferies have issued an ‘underperform’ rating for Tata Power, with target prices set at Rs 297 and Rs 325 per share, respectively.
CLSA attributed the modest profit growth in the April-June quarter to reduced wind utilization rates. Meanwhile, Jefferies highlighted concerns over execution delays and ongoing issues with the Mundra plant.
Nuvama on Tata Power
Nuvama analysts noted that the company’s valuations are lofty at 25 times FY26 PE and 3.4 times FY26 P/BV. They retained a ‘reduce’ rating on Tata Power with a target price of Rs 346.
Looking ahead, analysts suggested that renewable power producers will be key drivers for Tata Power’s future growth. The company’s management has outlined a capital expenditure of Rs 2,000 crore in FY25 for renewables, storage, and transmission & distribution (T&D), which is higher than previous projections.
Axis Capital on Tata Power
Axis Capital analysts have maintained an ‘add’ rating on Tata Power, raising their target price to Rs 500 from Rs 358 per share. They believe Tata Power is one of the most integrated utilities in India with a robust management team. Additionally, any movement towards the privatization of distribution companies (discoms) in the medium term will benefit Tata Power.
Investec on Tata Power
Conversely, Investec analysts have issued a ‘hold’ call on Tata Power, increasing their target price to Rs 467 per share from Rs 412. This upgrade reflects Tata Power’s plans to add 5.2 gigawatts (GW) of renewable energy sources and complete EPC work on 3 GW over FY25-26.
JM Financials maintains a ‘BUY’ rating on Tata Power with a SOTP-based target price of Rs 491 per share, noting the company’s consolidated net revenue for Q4FY24 at Rs 173 billion, reflecting a 14% year-on-year growth and 2% above JM Financials’ estimates.
The EBITDA stood at Rs 31 billion, up 14% year-on-year and 5% above their estimates, driven by higher sales in renewable energy and the Odisha and Delhi discoms. Reported PAT and adjusted PAT were Rs 12 billion (4% YoY, 59% above estimates) and Rs 10 billion (32% YoY, 30% above estimates), respectively.
JM Financials highlighted that after benefiting from the turnaround of Odisha DISCOMs, the company is now positioning for a performance upswing in renewables, with a projected revenue CAGR of over 25% from FY22-25E. Future performance improvements are expected in the transmission and generation businesses.
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