Brokerage on Tata Power shares rises on strong earnings growth outlook

“Key catalysts include – a possible tariff negotiation for Mundra UMPP for complete pass-through of fuel cost, full benefit of CGPL merger with Tata Power Standalone will help in reducing tax outgo. Tata Power The massive accumulated losses in CGPL and ramp-up in Odisha Discoms and T&D will be able to meet the reduction in losses,” the note said.

Potential monetization of RE business will unlock value and help clear the balance sheet. The brokerage retains its buy rating on Tata Power shares with revised target price 315 multibagger stock It has gained over 165% in one year, while the Tata Group stock is up more than 25% so far in 2022 (Year-to-date or YTD).

Sharekhan said the NCLT approval for merger of loss-making CGPL with Tata Power (standalone) would help in saving future tax in view of the massive accumulated losses in CGPL.

“We are looking at 10% earnings from CGPL merger. Also, a possible agreement with states (already in talks with Gujarat) for complete pass-through of fuel cost would result in significant earnings growth and lead to significant revenue growth for Tata Power. Assessment will help,” he said. Brokerage Note.

In addition, media reports indicate that Tata Power is planning to raise $700 million by involving strategic investors in its renewable energy business. It added that monetization of the RE business portfolio would unlock value and dent the balance sheet.

“The earnings growth will have multiple catalysts such as expansion of RE business, ramp-up of Odisha distribution business, new capex in power transmission and thus we expect a strong 36% PAT CAGR in FY 2011-24E. Possible tariff revision for Mundra UMPP may support income upgradation going forward,” according to Sharekhan.

The views and recommendations given above are those of individual analysts or broking companies and not of Mint.