After surging 40% from Feb low, where is Tata Power stock headed?

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NEW DELHI: Shares of Tata Power have climbed 43 per cent over February 24 close of Rs 204.35, thanks to a number of favourable news developments of late. At least two brokerages have come out with reports on the stock that suggest price targets of Rs 315-316 a piece.

A mean recommendation of 19 analyst estimates suggests a ‘hold’ rating on the stock.

On Wednesday, the scrip was trading 6.63 per cent higher at Rs 291.75.

“Tata Power Company has multiple levers for earnings upgrades and better valuation, which are only partially captured in its stock price,” Sharekhan said in a note.

Major catalysts, the brokerage said include a potential tariff negotiation for Mundra UMPP for full pass-through of fuel cost. Sharekhan said the full benefit of Coastal Gujarat Power (CGPL) merger with Tata Power standalone would help reduce tax outgo as Tata Power would be able to offset massive accumulated loss at CGPL. Also, the brokerage is positive on the ramp-up and reduction in T&D loss at Odisha discoms.

“Potential monetisation of RE business would unlock value and aid balance sheet deleveraging. We expect robust 36 per cent PAT CAGR over FY21-24 with likely improvement in RoE to 11.7 per cent. We retain a Buy rating with revised PT of Rs 315,” it said.

Among the recent updates, said brokerage Anand Rathi, Tata Power Company has collaborated with Rustomjee Group to provide end-to-end EV charging solutions across all its residential and commercial projects in Mumbai Metropolitan Region (MMR).

A Tata Power’s 100 per cent subsidiary Tata Power Renewable Energy has commissioned a 300 MW project in Dholera, Gujarat. This project will generate 774 MUs annually. Along with this, it will reduce approximately 704340 million tonne per year of carbon emission.

Tata Power’s Singapore-based JV — Resurgent Power Ventures has won the bid to acquire the stressed asset of South East UP Power Transmission Company (SEUPTCL) through its resolution process under the Insolvency and Bankruptcy Code (IBC), in which Tata Power will hold 26 per cent stake in the joint venture through its wholly-owned Singapore-based arm Tata Power International.

Also Tata Power Solar Systems, a wholly-owned subsidiary of Tata Power, has commissioned a 160 MW AC solar project at Jet star, Rajasthan.

“Approximately 6,75,000 monocrystalline PV modules were used in this installation. It will produce 387MUs of energy per year. From the recent development, we expect the company’s performance to improve from current levels. We maintain our rating on the stock to Buy with a revised target price of Rs 316,” Anand Rathi said in a note.

Hemang Jani, Equity Strategist and Senior Group at Motilal Oswal said that the entire utility space is seeing renewed interest and primarily on expectation that one will have a lot of push and incentives on the alternate energy front, be it solar power or green energy.

“The entire ecosystem around it and some of these utility companies particularly Tata Power, NTPC, Power Grid could be beneficiary of that. It is a very small sector in the overall scheme of things and an allocation at the institution level would be very small. We do like that space. We do think that despite the recent run up that we have seen in some names, they do offer some more upside and particularly for retail investors who are looking for a 10-15 per cent,” Jain said.



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