Brokerage MIB Securities believes Tata Power is best placed to benefit from India’s push to increase RE capacity to 500GW by 2030. There are multiple catalysts from RE assets value-unlocking, sale of non-core assets, tariff resolution and tax benefit from merger of Mundra assets in the standalone entity and new renewable and distribution contracts, it said.
The brokerage has initiated coverage on Tata Power shares with a Buy rating and SOTP-based target price of ₹300 apiece, implying a potential upside of over 20% from current level. The multibagger stock has rallied more than 150% in a year’s period, whereas the scrip is up about 10% in 2022 (YTD) so far.
Tata Power is transforming itself into a RE utility targeting 60% share of clean energy by 2025 and 80% by 2030; tapping the large regulated distribution privatisation opportunity; tapping the EPC solar market, electric vehicle (EV) charging and government subsidies on solar pumps and solar roofs; and debt reduction, selling non-core assets and value unlocking in carved out RE assets, the note highlighted.
With specific environmental targets for 2025-30, Tata Power has pledged for carbon-neutral status before 2050 and plans to be water neutral and zero waste to landfill by 2026.
“The focus will be on power transmission and distribution, which offers stable ROEs and upside from lower AT&C losses. TPWR is India’s #1 distribution company with 12.3m customers. We believe this will give more predictability and stability to earnings. The recent fund raising announcement in renewables business of ₹40 billion for about 10% stake is a testimony to the improving business dynamics,” MIB Securities added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.