Tata Power pops 3% after solid Q2. Should you invest?

Shares of Tata Power rallied 2.9% to an intraday high of Rs 439.50 on the BSE on Thursday after the company reported a net profit (before exceptional items) of Rs 1,533 crore for the September 2024 quarter, compared with Rs 1,017 crore in the same quarter last year.

This represents a 51% year-on-year (YoY) increase. Meanwhile, revenue from operations fell 1% YoY to Rs 15,247 crore.

Consolidated EBITDA for the quarter rose 23% to Rs 3,808 crore, driven by increased solar manufacturing, favorable regulatory developments in distribution, and enhanced operational efficiency across businesses.

The company also stated that it is well on track with its planned capital expenditure (Capex) for the financial year, having spent Rs 9,100 crore during H1 out of a total of Rs 20,000 crore.

The transmission portfolio now stands at 7,049 circuit kilometers (Ckm), including 4,633 Ckm that are commissioned and 2,416 Ckm currently under construction.

Also read: L&T shares rally 5% after Q2 PAT beats Street estimates. Should you buy, sell or hold?

Here is what analysts say after the Q2 update:


Motilal Oswal: Buy | Target price: Rs 509


The domestic brokerage firm stated that the target price of the stock is based on the valuation of Tata Power, segmented across various business units. The company reported a consolidated EBITDA that was 15% above Motilal’s estimate, driven by increased solar manufacturing and operational efficiency across its businesses. Following a weak quarter, the target price has been adjusted downward, primarily to account for Rs 440 crore in merger-related charges and the weaker profitability of some subsidiaries in Odisha.

Nuvama: Neutral | Target price: Rs 346


While Nuvama expressed support for Tata Power’s renewable energy transition story, it finds that the risks outweigh the rewards, as current valuations exceed their bullish case for CGPL profits. Although the company aims to double its FY23 PAT to Rs 65,000–70,000 crore by FY27, there are concerns about potential delays, which depend on the completion of the 15 GW renewable energy target and the scale-up of the captive solar manufacturing plant.

JM Financial: Buy | Target price: Rs 501


The company is well positioned for performance upside, with traction in transmission (2,416 Ckm under construction), distribution (20% revenue CAGR FY22-24 in Odisha DISCOMs), renewable energy (5.8 GW pipeline), and pumped hydro storage (2.8 GW). This involves a capital expenditure (CapEx) of Rs 20,000 crore in FY25, with Rs 9,100 crore already spent in the first half of the year.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)