Tata Power to rally 29%? Motilal Oswal sees data center boom fuelling nuclear pivot

Tata Power is increasingly finding itself at the centre of several long-term growth themes.

The domestic brokerage Motilal Oswal remains positive on the Tata Group company. The brokerage has reiterated its ‘Buy’ rating on Tata Power with a target price of Rs 488, implying an upside potential of nearly 29% from the current market price.

So, what is giving the brokerage confidence? Let’s take a look –

A new chapter begins with nuclear power

One of the biggest takeaways from Tata Power’s recent Annual General Meeting (AGM) was its planned entry into the nuclear power business.

As per the brokerage report, Tata Power is working with the Nuclear Power Corporation of India Limited (NPCIL) to develop its first 440-megawatt Bharat Small Reactor project.

Motilal Oswal noted, “Nuclear project with NPCIL: A new long-term growth avenue.”

The company has already identified land across three states, while work related to project planning and approvals is progressing. However, the first project is unlikely to be commissioned before the early 2030s.

The brokerage believes the opportunity could become much larger over time as India targets 22 gigawatts of nuclear capacity by FY32 and 100 gigawatts by 2047.

Tata Power: Can profits accelerate from here?

Apart from nuclear energy, Motilal Oswal expects Tata Power’s earnings to improve significantly over the current financial year.

“We model 34% YoY growth in FY27 PAT,” added Motilal Oswal report.

Profit After Tax (PAT) is expected to benefit from multiple factors rather than one single business.

The brokerage expects losses at the Mundra power plant to reduce sharply during FY27. It also believes stronger earnings from Tata Power’s Indonesian coal business, healthy profitability at Tata Power Solar and higher renewable energy capacity additions will support overall earnings growth.

Tata Power: Renewables continue to remain a key pillar

Renewable energy remains another important growth engine for Tata Power.

According to the brokerage report, the company plans to commission nearly 2 to 2.5 gigawatts of its own renewable energy capacity during FY27.

The brokerage also highlighted that Tata Power Solar continues to operate with more than 90% utilisation at its cell manufacturing facilities, while surplus production is also being sold to third-party customers.

Transmission and distribution businesses add stability

Tata Power also plans to significantly increase investments in its Mumbai transmission business.

The report noted that annual capital expenditure is expected to double from around Rs 1,500 crore to nearly Rs 3,000 crore, supporting regulated returns over the coming years.

Meanwhile, operational performance in Odisha’s power distribution business continues to improve.

Why nuclear demand could become even stronger

Motilal Oswal also believes structural changes in electricity consumption could create fresh demand for nuclear power.

The report stated, “The emergence of AI-led data centers and other power-intensive industries represents a key demand driver for nuclear power.”

Artificial Intelligence (AI) data centres require reliable round-the-clock electricity, making nuclear energy an important complement to renewable power, noted the brokerage house report.

Disclaimer: Investment research and brokerage ratings, including target prices, are subject to significant market risks, volatility, and shifting regulatory landscapes in the power sector. The forward-looking estimates and buy recommendations presented here are the opinions of the specific brokerage house and do not constitute an offer, solicitation, or personal financial advice. Investors should independently evaluate the underlying business metrics and consult a SEBI-registered investment advisor before making any allocation decisions.

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