Tata Power share price tanked 4% on Wednesday despite the company reporting a 103.2% rise in its consolidated net profit at Rs 794.60 crore in the April-June 2022 quarter, beating street estimates by a wide margin. The Tata Group firm’s revenue from operations increased 43% to Rs 14,495.48 crore. The strong performance was mainly driven by high profits from Coal JV. So far this year, Tata Power share price has fallen 3.2% and analysts see limited upside on the stock despite a second consecutive quarter of strong growth. The stock was quoting at Rs 216 on NSE, down 4% from previous close.
No major triggers in the near-term
According to analysts at Edelweiss Securities, Tata Power Q1FY23 PAT topped consensus estimates driven by significant outperformance from the coal business (elevated coal prices). Tata Power’s CGPL is currently operating under section 11 (cost pass through), thus limiting near-term losses. Moreover, the elevated coal prices could sustain a higher PAT trajectory, according to analysts. “While we remain structurally positive, deterioration in some key items require monitoring,” they said. Tata Power will shortly receive Rs 2,000 crore from RE monetisation, providing equity support to accelerate RE manufacturing and generation business. There are no major triggers in the near-term, the brokerage noted. It maintains ‘Hold’ rating on the stock with a target price of Rs 250, implying 10% upside on Tuesday’s closing price.
Tata Power to remain a strong player in the EPC space
Analysts at B&K Securities believe that Tata Power has positioned itself as India’s largest integrated renewable play. “With cell and module capacity expansions on, the company will remain a strong player in the EPC space, with likely margin improvement from its own manufacturing. We believe Mundra’s long-term resolution and PPA tariff change can give a much better outlook for the UMPP business,” the brokerage said. It expects Tata Power’s RoE to improve over the next five years to ~12% by FY25 on the back of strong growth in EPC + New business which is low capital, low margin but high RoE accretive business. B&K Securities maintains ‘buy’ rating with an unchanged target price of Rs 246 per share.
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