Tata Power shares snap 3-day fall, climb 5% today; brokerage sees more upside

May 15,2024

Shares of Tata Power Company Ltd saw a sharp uptick in Tuesday's trade, halting their three-day losing run. The stock jumped 4.89 per cent to hit a day high of Rs 431.95. Brokerage ICICI Securities has resumed coverage on the counter with a target price of Rs 490 per share.

"Tata Power reported adjusted profit of Rs 800 crore (up 5 per cent YoY) in Q4 FY24 and Rs 3,200 crore (up 3 per cent YoY) in FY24. The muted profit growth was due to low international coal prices," it stated.

"Tata Power is building one of the best RE (renewable) platforms – a mix of asset-light and asset-heavy businesses. Tata Power is operating 4.5GW of RE assets with EBITDA of Rs 3,000 crore. Over the last two years, it has increased its under-construction portfolio to 5.5GW. We estimate EBITDA from RE assets to grow to Rs 6,000 crore over the next three years," the brokerage said.

For solar manufacturing, ICICI Sec mentioned that Tata Power entered into manufacturing cell and module capacity in CY06 with 0.5GW capacity. "Armed with experience, it is now ramping up production capacity by another 4GW cell and module. We note that domestic industry is protected through custom duty on cell and modules. We are baking in a profit of Rs 700 crore for FY26E," it mentioned.

"India is revamping the policies to give a boost to solar rooftop segment with higher subsidy and 40GW target over the next couple of years; we expect Tata Power to benefit from this opportunity. We estimate a 2GW rooftop market and a profit of Rs 700 crore by FY26E," ICICI Sec further stated.

"We value the renewables business, including pumped storage projects, at Rs 1.04 lakh crore (Rs 326/share)," the brokerage underscored.

Though, ICICI Sec did flag delay in execution of RE (renewable) projects as key risk.

On technical setup, the stock looked strong on daily charts. "The counter can hit an upside target of Rs 444 in the near term. Keep stop loss placed at Rs 420," said Ravi Singh, Senior Vice-President (Retail Research) at Religare Broking.

As of March 2024, promoters held a 46.86 per cent stake in the Tata Group firm.