Tata Power’s December quarter revenue, although strong, fell short of analyst estimates. The Tata group reported almost doubling of profit, which met analyst projections. A couple of brokerages have a ‘hold’ call on the stock despite the recent fall in Tata Power shares, with targets of up to Rs 272 level.
The power producer reported a 91 per cent jump in consolidated net profit at Rs 1,052.14 crore compared with Rs 551.89 crore in the same quarter last year. Analysts said the surge in profit was largely due to revenues that were booked for an earlier period following a CERC order.
Nuvama said all businesses performed broadly in line except the solar EPC business, which was impacted by slower execution in the wake of high prices of wafers, polysilicon, cells and modules.
“TPCL is likely to receive Rs 2,000 crore from RE monetisation soon, providing equity support that should help it accelerate RE manufacturing and generation business. EPC margin is the key variable to keep an eye out for. This coupled with the stock’s rich valuation forces our hand to maintain ‘HOLD/SN’ with a target of Rs 217,” Nuvama said. This is against Rs 250 target that Nuvama had assigned to Tata Power earlier.
Revenue rose 30 per cent to Rs 14,339 crore for the quarter compared with Rs 11,015 crore in the corresponding quarter last year. Ebitda rose 53 per cent YoY to Rs 2,818 crore, led by capacity addition in renewables and better performance across all businesses.
Elara Securities said the management seeks to scale up RE capacity to 15 GW by FY25 from the current 3.9 GW, increase focus on the power distribution business, and seize opportunity in the solar EPC business. The brokerage has roll over its estimates to FY25E, while maintaining FY23E/24E estimates in tact.
“We raise our target from Rs 258 to Rs 272 on SOTP (FY25E). We upgrade the stock to ‘Buy’ given a 20 per cent fall in the stock price since the peak in September 2022,” it said.
On Monday, the scrip was trading 2 per cent higher at Rs 209.40 on BSE.
HDFC Institutional Equities has a target of Rs 243 for Tata Power. The company’s planned 4 GW of the extended module and cell capacity is expected to be rolled out in September 2023 and December 2023, respectively, it said.
Tata Power’s EPC order book remains strong at Rs 15,400 crore (3.9GW) and is gaining traction. Renewable Energy capacity increased to 6.1 GW in the December quarter, with an installed capacity of 3.9 GW and 2.2 GW is under various stages of implementation.
“Post-December, Sec 11 was not extended and the company operated only 1 unit of the Mundra plant in January. However, it expects to sign a supplementary PPA with Gujarat and later with other beneficiaries on similar lines to Sec 11. We maintain ADD rating with SoTP of Rs 243, factoring in margin restoration in its EPC business, healthy demand in its distribution circles, lower AT&C losses across Odisha circle, and growing renewable business,” HDFC Institutional Equities said.
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