Tata Power charts out strong growth trajectory, betting big on renewable energy biz; analysts’ views mixed

Tata Power charts out strong growth trajectory, betting big on renewable energy biz; analysts’ views mixed

Tata Power share price jumped 1 per cent on Thursday, a day after Tata Motors signed a Power Purchase Agreement (PPA) with the company to develop a 7.25 MW onsite solar project at its commercial vehicle manufacturing facility in Jamshedpur. “Tata Motors and Tata Power Renewable Energy’s joint green initiative for solarisation of Tata Motors’ Jamshedpur Plant is a big step towards achieving RE100 goals,” said Gurinder Singh Sandhu, Chief, New Business Services, Tata Power. Tata Power shares were quoting at Rs 232, up 1 per cent on NSE. So far this year, the stock has jumped over 3.5 per cent. Analysts’ views remain mixed on the stock.

Also Read: Bharti Telecom to buy 3.33% Airtel stake from Singtel for Rs 12,895 cr sale & transfer to happen in November

The brokerage said, “We maintain our SoTP-based target price of Rs 262 on TPWR, but downgrade the stock to ADD (from Buy) due to stock price run-up (12.3% over past 6M).” They believe that long-term potential of the company’s businesses is good, especially its renewables and distribution businesses, and that the company is the best-placed private player in the power sector, with businesses across the value chain and backward integration.

Tata Power: HoldTarget price: Rs 250 | Upside 8%

Tata Power’s management at its annual analyst meet recently, exuded confidence about the paradigm shift in the power sector landscape and its apt positioning to ride the new leg of growth with sustainability at its core. The company laid out an Rs 1 lakh crore 5Y mega capex plan, leaning on RE and T&D, keeping D/E under check at 1.5x (worst case 2x). In view of Edelweiss analysts, resilience, sustainability and consumer orientation are the three pillars of TPWR 2.0 and are visible in its actions. “New businesses’ low profitability is transitory in nature accentuated by abrupt market changes – commodity/forex inflation. But, this could start zooming once the situation normalises and it attains critical mass.

Also Read: Nifty needs to negate formation of lower high pattern to head to 17700-17777; maximum call OI at 18000

According to the brokerage, given the tricky power demand-supply scenario, Mundra resolution is in the final stages. This, along with a high coal price scenario, bodes well for Tata Power. “Overall, TPWR’s integrated business strategy has made positive strides keeping in mind its core focus areas. We remain structurally positive and believe that TPWR has chartered out a strong growth trajectory (at least 15% compounding for the next couple of years),” it said. Edelweiss maintains a ‘hold’ rating on the stock with a target price of Rs Rs 250, given Tata Power being fairly valued.

(The stock recommendation in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)