The shares of this electricity generation company surged 9 percent after a well-known brokerage firm revised its target to “buy” from its earlier rating of “hold.” The shares have delivered its shareholders more than 50 percent returns on a YTD basis.
With a market capitalisation of Rs. 1,00,463 crores, the shares of Tata Power Company Ltd started Thursday’s trading session on a flatter note at Rs. 295 compared to its previous close at Rs. 294.15. The share hit a high of Rs. 322.25, gaining around 9 percent, which is also recorded as the company’s 52-week high. The shares are currently trading at Rs. 319.45 apiece.
Such a bullish price movement in stock was observed after a well-known brokerage firm JM Financial upgraded the stock to “buy” from its earlier rating of “hold.” The brokerage firm has hiked its price target on the stock by 40 percent from Rs. 220 to Rs. 350. Even after moving around 8 percent in today’s trading session, the revised price target implies a potential upside of 20 percent.
The investment rationale for providing such a recommendation pertains to four major aspects of Tata Power’s recalibration strategy, which includes tapping into high-margin group captive renewables opportunities, exiting low-value businesses, venturing into brownfield hydro storage and expanding the transmission business beyond distribution.
Additionally, the brokerage expects a resolution for the Mundra issue for Tata Power and is forecasting a Compounded Annual Growth Rate (CAGR) of 15 percent in revenue, 23 percent for EBITDA and 32 percent for net profits over the financial year 2023 to 2026. Furthermore, the brokerage firm also expects Tata Power’s earnings to be supported by increasing the asset base and an improved margin.
Looking at the company’s financial statements, the revenue increased marginally by around 3 percent from Rs. 15,213 crores in Q1 FY24 to Rs. 15,738 during Q2 FY24. On a contrasting note, the net profit declined by 6 percent from Rs. 1,141 crores to Rs. 1,017 during the same timeframe.
The company has achieved an order book of 4,391 MW which amounts to Rs. 18,700 crores and they aim to achieve an order book of Rs. 20,000 crores by FY 30. Furthermore, the company aims to deliver good returns in the renewable sector and plans to focus on hybrid projects and 24/7 renewable power. The company is expected to invest a CAPEX of Rs. 11,000 crores for the full year.
Headquartered in Mumbai, Tata Power Company Ltd is a part of Tata Group which is engaged in electric utility and electricity generation. The company has a diversified portfolio across the entire power value chain from renewable and conventional energy generation to transmission and distribution, trading, storage solutions, and solar cell manufacturing.
Written By Vaibhav Patil
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