Tata Power is one of the largest end-to-end utility companies in India. It generates, transmits and distributes electricity. Its operations are spread across India with capacities in thermal, solar, wind, hydroand waste heat recovery. The company plans to be an entirely renewable energy company in future. Besides, the company installs and operates electric vehicle charging stationsand solar rooftop panels at houses. The company also manufactures solar panels.
The Tata Power share has not seen much demand in the calendar year 2022. As of November, the counter has risen nearly 3% against a 39%jump in S&P BSE Power and a 33% surge in S&P BSE Utilities.However, analysts remain bullish on the stock as they believe new growth drivers are emerging for the company. Its financial performance has also improved, which is evidence of improving the firm’s business outlook.
In the quarter ending September 2022, Tata Power reported impressive quarterly performance buoyed by higher profits from coal subsidiaries and the Mundra business. The performance of Tata Power Solar Systems, Tata Projects and distribution businesses was also strong. On a consolidated basis, the company’s revenue was at Rs.14,150 crore, which was up 49% year on year (YoY), mainly due to higher power sales across distribution companies and higher revenue from coal businesses.The reported profit was up 85% YoY at Rs940 crore.
High debt levels perennially plague Power companies. The company’s net debt is at Rs. 40,000 crore, which analysts at ICICIdirect said at “comfortable levels”. They added that the cost of debt was also under control and had increased by 40 basis points YoY vs 190 basis points YoY increase in repo rate. About 100 basis points are equal to a percentage point.
Improving RE portfolio
The company’s total renewable energy (RE) capacity has increased to 5,660 megawatts with an installed capacity of 3,870 MW and 1,790 MW under different stages of implementation. Its solar manufacturing unit is expected to be operationalised in the calendar year 2023.It has commissioned a 138 MW solar rooftop and won orders for 338MW of Q2. Its presence has increased to over 100 cities now. Solar pumps: It also installed about 6,000 solar pumps during Q2.
What do analysts say?
The ICICIdirect has a ‘buy’ rating on Tata Power share price with the sum of the parts (SoTP) target price at Rs. 262. The stock trades at Rs. 230 as of November 2022. They believe in the long-term potential of the company’s businesses, especially its renewables and distribution businesses.