Amid the ongoing market rally, a handful of companies have doubled investors' money in the last 12 months. Shares of Tata Power have surged from Rs 57 to Rs 133.05 mark today in the last 12 months - yielding around 133 per cent in this period. In comparison, the Nifty 50 index gained over 53 per cent and the S&P BSE Sensex rose over 50 per cent.
The stock rose 1.5 per cent to hit an intraday high of Rs 133.05 on BSE. With a market capitalisation of more than Rs 42,000 crore, the share stands higher than 20 day, 50 day, 100 day and 200 day moving averages but lower than 5 day moving averages.
The company reported a net profit of Rs 465.69 crore for the quarter ended June 2021. Profit in the year-ago period stood at Rs 268.10 crore. Total income grew 55 per cent to Rs 10,145.89 crore in the June-ended quarter against Rs 6,540.42 crore a year ago.
Commenting on the Company's performance, Dr. Praveer Sinha, CEO & Managing Director, Tata Power said, "We aim to scale up our renewable portfolio from the current 4GW to 15GW by 2025 and to 25GW by 2030 thereby achieving 80% clean generation capacity, up from the current 31%."
According to MarketsMojo, the company has declared positive results for the last 5 consecutive quarters. However, it is a high debt company with a Debt to Equity ratio (avg) of 2.30 times.
The stock is trading at a discount compared to its average historical valuations and with a ROCE of 7.2, it has a Fair valuation with a 1.3 Enterprise value to Capital Employed.
Motilal Oswal noted that divestment-related measures and infusion from the promoter have aided a debt reduction. Furthermore, the EPC and Renewables businesses are set to gain momentum, led by a healthy project pipeline. The possible benefit from the merger of Coastal Gujarat Power Ltd (CGPL) presents an upside to profitability.
"We expect Solar EPC to give a leg up in earnings for the next two years. Recent award wins, particularly from NTPC, have seen its EPC order book inflate to Rs 8500 crore, thereby providing strong visibility," the brokerage firm said.
"This - coupled with the commissioning of renewable projects and the takeover of Odisha DISCOMs - should lead to a 33% PAT CAGR over FY21-23. Furthermore, the possible benefit from the merger of CGPL with itself provides an upside to profitability. We maintain Buy on Tata Power and raise our SOTPbased TP to Rs 156/share (earlier: Rs 123/share) - as we roll forward our valuations to Sep'23 and increase our valuation on the Renewables business to 9.5x EV/EBITDA (v/s 8.5x EV/EBITDA earlier), given the growth prospects and lower interest rates," it added.
CLSA has a 'Buy' rating with a target price of Rs 160 per share. The brokerage house maintained a buy rating as repricing of debt and net long coal drove a solid Q1.
Sharekhan has a 'Buy' rating on the stock too with a target price of Rs 165 per share. The brokerage firm said that the company's focus on business restructuring and balance sheet deleveraging plan would play a crucial role for a sustained improvement in earnings profile (high growth from RE and power distribution segments) and improve investor confidence.
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