Tata Power Company Ltd reported a profit after tax of Rs 1,118 crore for the December quarter, up 10 per cent YoY against 7-17 per cent rise in profit that analysts anticipated earlier. This profit figure was driven by a one-off regulatory income of about Rs 330 crore at Mundra. Analysts are optimistic on Tata Power's long-term prospects but differ on its target price.
Tata Power is India's largest private integrated utility and is present across the value chain, from generation to coal mining to power distribution and power equipment. MOFSL said Tata Power's Q3 Ebitda came in 4 per cent below its estimate but was up 38 per cent on a YoY basis.
The rise in Ebitda was driven by robust growth in the standalone business amid strong PLFs and regulatory upside in Mundra and rising contribution from the renewables business -- progressive commissioning of renewable generation capacity and earnings contribution from the cell and module business. Profitability at the PAT level was driven by other income, which came in higher than estimates, MOFSL said.
"While 3QFY25 adjusted PAT was above our expectations, overall, we trim our FY26-27 EPS by 7 per cent/7 per cent, mainly due to a slower-than-expected pace of commissioning in the RE generation business. We reiterate our 'Buy' rating on the stock with a target price of Rs 490.
Nuvama said it stays optimistic on Tata Power's long-term renewable energy transition (65 per cent mix by FY28), solar manufacturing (50 per cent external sales by FY27) and optionality of solar rooftops, nuclear and potential UP Discom acquisition. "However, the growth is back-ended and priced in; maintain ‘Reduce’ with SotP-based target price of Rs 343 (implied B/V = 2.5x FY27E)," it said.
Antique Stock Broking has retained its 'Buy' rating on the stock with a revised target rice of Rs 477 from Rs 513 earlier, factoring in 14 times EV/Ebitda valuation for renewable assets against 16 times ascribed earlier.
"The stock trades at 2.4 times FY27E PBV (at a slight premium to +1 STD); the premium is for longevity of cash flow and capex laid out for growth. Catalyst for stock performance is timely commissioning of renewable capacity. Here, Tata Power plans to add 2-2.5 GW per annum -- solar EPC order inflow, further opportunities under pumped hydro, nuclear power plant (which is evolving)," Antique Stock Broking said.
"Adjusted PAT grew 9 per cent YoY since Q3FY24 also had one-off income from ITPC dividend. Solar module + cell manufacturing ramped up (though knocked off in consolidated PAT), as it is mostly used in captive solar plants, aiding IPP segment IRRs.