Tata Power shares: Morgan Stanley reiterates 'Overweight' stance, raises target price

Morgan Stanley has reiterated its positive outlook on Tata Power, maintaining an 'Overweight' rating and raising its target price to Rs 449, up from Rs 425. Despite some delays in the commissioning of renewable energy projects, the global brokerage remains confident in the company’s growth prospects over the coming years.

Its projections for Tata Power's RE commissioning indicate a gradual increase, with expectations of 1.7 GW in fiscal year 2026, 1.8 GW in 2027, and 2.9 GW in 2028. By fiscal year 2028, the green business is anticipated to account for about 58 per cent of the company's EBITDA. This shift towards RE underlines Tata Power's commitment to sustainable growth.

In terms of financial performance, Morgan Stanley forecasts compounded annual growth rates (CAGRs) of 15 per cent for EBITDA (earnings before interest, taxes, depreciation and amortisation) and 14 per cent for profit after tax (PAT) over the fiscal years 2025 to 2028.

The brokerage also anticipates an improvement in return on equity (RoE), which is expected to rise by approximately 90 basis points (bps) to 13.8 per cent by the end of fiscal year 2028.

Further, the estimate indicates that underlying net debt-to-EBITDA will peak at 3.6x, which provides substantial headroom for further expansion.

The Tata Group firm recorded a 24 per cent rise in its consolidated net profit, at Rs 1,306 crore, in the January-March 2025 quarter (Q4 FY25) as against Rs 1,045.6 crore in the year-ago period. Its revenue increased around 8 per cent to Rs 17,096 crore.

The company's EBITDA surged 39 per cent to Rs 3,245.4 crore. Its operating margin came at 19 per cent in Q4 FY25 from 14.7 per cent in the corresponding period last fiscal.

Shares of Tata Power settled 1.61 per cent higher at Rs 401.95 today. At this closing value, the stock has climbed 2.43 per cent in 2025 so far compared to a 4.09 per cent rise in benchmark BSE Sensex during the same period.