Tata Power Company reported strong performance in Q1FY23 with higher revenue and profit growth. Despite the negative impact of higher profits in the coal business and losses booked for Tata Projects and TPSSL as well as conservative accounting for CGPL, net profit was up 103% year-on-year (YoY).
“Tata Power Business Restructuring (CGPL Merger) and focus on entry into high-growth RE business and power transmission will play a key role for sustained earnings growth and better earnings quality (expected only for improving RoE in FY2024E). Will improve to 7.8% vs 12.1% in FY2022),” said Sharekhan. The brokerage has retained its buy rating Shares of Tata Power with a revised price target of 260.
In addition, management’s business restructuring plan to increase the share of the high-growth RE business will lead to continued improvement in ESG scores. The turnaround of Mundra UMPP and higher profitability in Odisha discoms are the catalysts, the brokerage said.
According to the company, the first installment of Analysts at ICICI Securities, another domestic brokerage house, expect $20 billion from TPREL’s stake sale in the next few weeks, which will provide the company with immediate growth capital, making it more competitive in the auction.
For CGPL, tariff fixation by CERC as per Section 11 of Electricity Act will help in reducing under-recovery. Also, the supplementary PPA, if signed with Gujarat, would be a big positive, he said.
“As the provisioning and write-off is now complete for both Tata Projects and TPSSL, we believe they should move forward from Q2FY23. Relaxation in commodity prices and in-house contract manufacturing arrangement in case of TPSSL will also help.” 262 per share.
Tata Power CEO and MD Praveer Sinha said that all the business groups of the company such as generation, transmission, distribution and renewable energy have performed well. “This is aptly reflected in our 11th consecutive quarter of PAT (profit after tax) growth. We have a strong growth trajectory with stable long-term cost structures and competitiveness across businesses. Future-ready EAAS (As a Service) As Energy Storage) company, we are well positioned to contribute to India’s green energy transition,” he said.
The views and recommendations given above are those of individual analysts or broking companies, not Mint
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