Tata Power shares: Nuvama sees 23% downside, cuts stock price target to Rs 303
Tata Power target price: Nuvama has cut its rating on Tata Power to 'reduce' from 'Hold' with a revised target price of Rs 303, hinting at 23 per cent potential downside.
- Feb 12, 2024,
- Updated Feb 12, 2024 7:48 AM IST
Nuvama Institutional Equities expects Tata Power Company Ltd to report a flattish-to-low growth over FY24-25E amid falling coal realisations as it sees rising contribution of renewable energy to take two–three years to play out. The domestic brokerage is watchful of upcoming growth potential from pumped hydro, rooftop solar, C&I PPAs with Tata group for RE, and new distribution privatisation.
For now, Nuvama has cut its rating on Tata Power to 'reduce' from 'Hold' with a revised target price of Rs 303, hinting at 23 per cent potential downside.
In the December quarter, Tata Power reported a consolidated profit after tax of Rs 1,076.12 crore, up 2.28 per cent. Coal profits fell 81 per cent YoY coupled with CGPL losses, offset by growth in solar EPC, Odisha Discom and Tata Projects.
On a nine-month basis, PAT declined 6 per cent YoY, adjusted for one-off dividend from ITPC Zambian asset (past regulatory dues).
"Tata Power had cut its FY27 PAT guidance by Rs 2,000 crore. While the RE business is yet to reach 3-4GW additions/year required to meet FY27 PAT targets, falling coal profits remains a drag. Despite our bull case of CGPL profits u/s11, Coal at 130$, and RE at Rs 40,000 crore deal value, we find 23 per cent downside," the domestic brokerage said.
Nuvama assumes CGPL to remain profitable as it expects assume sec-11 benefits to remain till perpetuity (currently till June 2024). The coal profits for the first nine months fell by estimated 81 per cent to Rs 570 crore, on falling coal realisation.
This was offset by rising profits of Solar EPC and Odisha distribution. Tata Power's captive solar module factory has commissioned. It expects to start solar cell production by June 2024.
"Much of this captive cell/module capacity shall be used for captive supply to its solar IPP/EPC/rooftop segments with some export optionality. Tata Power has signed an MoU with Maharashtra government for brownfield development of 2.8GW pumped hydro storage at its existing hydro assets (expected CoD by FY27–28). TPREL has won FDRE projects from SJVN of 1,316MW, solar 460MW, Wind 799MW and BESS 57.5MW," Nuvama noted.
Nuvama said Tata Power's net debt as on 9MFY24 stood at Rs 38,600 crore with net debt to equity ratio remaining healthy at 1.04 times, which is expected to grow to 1.5–2 times as capacity expands.
Also read: Stock recommendations by analyst for February 12, 2024: Adani Ports, ACC and Dr Reddy's
Nuvama Institutional Equities expects Tata Power Company Ltd to report a flattish-to-low growth over FY24-25E amid falling coal realisations as it sees rising contribution of renewable energy to take two–three years to play out. The domestic brokerage is watchful of upcoming growth potential from pumped hydro, rooftop solar, C&I PPAs with Tata group for RE, and new distribution privatisation.
For now, Nuvama has cut its rating on Tata Power to 'reduce' from 'Hold' with a revised target price of Rs 303, hinting at 23 per cent potential downside.
In the December quarter, Tata Power reported a consolidated profit after tax of Rs 1,076.12 crore, up 2.28 per cent. Coal profits fell 81 per cent YoY coupled with CGPL losses, offset by growth in solar EPC, Odisha Discom and Tata Projects.
On a nine-month basis, PAT declined 6 per cent YoY, adjusted for one-off dividend from ITPC Zambian asset (past regulatory dues).
"Tata Power had cut its FY27 PAT guidance by Rs 2,000 crore. While the RE business is yet to reach 3-4GW additions/year required to meet FY27 PAT targets, falling coal profits remains a drag. Despite our bull case of CGPL profits u/s11, Coal at 130$, and RE at Rs 40,000 crore deal value, we find 23 per cent downside," the domestic brokerage said.
Nuvama assumes CGPL to remain profitable as it expects assume sec-11 benefits to remain till perpetuity (currently till June 2024). The coal profits for the first nine months fell by estimated 81 per cent to Rs 570 crore, on falling coal realisation.
This was offset by rising profits of Solar EPC and Odisha distribution. Tata Power's captive solar module factory has commissioned. It expects to start solar cell production by June 2024.
"Much of this captive cell/module capacity shall be used for captive supply to its solar IPP/EPC/rooftop segments with some export optionality. Tata Power has signed an MoU with Maharashtra government for brownfield development of 2.8GW pumped hydro storage at its existing hydro assets (expected CoD by FY27–28). TPREL has won FDRE projects from SJVN of 1,316MW, solar 460MW, Wind 799MW and BESS 57.5MW," Nuvama noted.
Nuvama said Tata Power's net debt as on 9MFY24 stood at Rs 38,600 crore with net debt to equity ratio remaining healthy at 1.04 times, which is expected to grow to 1.5–2 times as capacity expands.
Also read: Stock recommendations by analyst for February 12, 2024: Adani Ports, ACC and Dr Reddy's