The domestic power sector looks set to clock a robust growth in years to come, driven by strong energy demand growth and a significant opportunity led by the conversion of grey to green energy, foreign brokerage Nomura India said in its latest note. It initiated coverage on Tata Power Company Ltd and JSW Energy Ltd with 'Buy' ratings, saying India’s energy demand growth will be stronger than the past in the next five years, which would drive a robust value-creation opportunity.
The power sector is on a long runway for growth would be an understatement at best, it said. In the case of Tata Power, the brokearge sees the Tata group firm delivering 16 per cent Ebitda growth compounded annually over FY24-27, driven by a 2 times increase in renewable energy (RE) capacity, robust delivery on Rs 15,700 crore solar EPC orderbook and a jump in Odisha profitability. It expects JSW Energy to deliver a solid 38 per cent CAGR over FY24-27, underpinned by an over 2 times increase in operational capacity and healthy margins on RE generation projects.
Tata Power share price target
Nomura India suggested a target price of Rs 560 for Tata Power. The outlook for the Tata group firm remains robust as the company aims to deliver a significant Ebitda CAGR over FY24-27 by doubling its RE capacity to 10GW by FY27. Tata Power is seen delivering robustly on its EPC business, with a growing orderbook which is currently at Rs 15,700 crore. It is seen scaling up its recently commissioned 4.3GW cell-to-module facility. Tata Power could see a sharp jump in profitability for the Odisha DISCOM business, Nomura Indai said adding that Tata Power will be a key beneficiary of the potential DISCOM reform given its right-to-win on turning around all the regions it currently operates in.
"Further potential upside stem from a significant opportunity on fructification of MoUs with the Rajasthan government in the coming years," it said.
JSW Energy share price target In the case of JSW Energy, the brokerage suggested a target price of Rs 885 based on 15 times December 2026 EV/Ebitda, driven by a robust outlook with 38 per cent Ebitda CAGR over FY24-27, driven by the company doubling its RE generating capacity by FY27 and likely achieving its 20GW target well ahead of Calendar 2030.
Nomura India said JSW Energy offers a significant earnings visibility given 92 per cent share of its capacity is tied up under LT PPAs. Large wins in the upcoming RE tenders with lucrative tariffs delivering mid-teen IRRs, and upsides from higher utilizations are a few other positives for JSW Energy.