15% upside seen in Tata Power stock; brokerages bullish as share touches new life high

Shares of Tata Power touched an all-time high of Rs 287.90 per share on Wednesday, surging over by 5.5 per cent on the BSE on an intraday basis. The stock has extended its upward move for the second straight session and has gained over 14 per cent in the two sessions.  

Domestic brokerage firm ShareKhan is bullish on Tata Power and sees an upside of over 15 per cent in the stock. 

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The company has multiple levers for earnings upgrades and better valuation, which are only partially captured in its stock price, It said in its report.  

The brokerage lists out major catalysts for the company are:  

1) A potential tariff negotiation for Mundra UMPP (Ultra Mega Power Project) for full pass-through of fuel cost,  

2) Full benefit of CGPL (Coastal Gujarat Power Limited) merger with Tata Power standalone would help reduce tax outgo as Tata Power would be able to offset the massive accumulated loss at CGPL  

3) Ramp-up and reduction in T&D loss at Odisha discoms.  

The company’s focus on business restructuring (CGPL merger) and on high growth renewable energy (RE) business, and entry into power transmission and balance sheet deleveraging plan would play a crucial role in sustained earnings growth and improved earnings quality, ShareKhan said.  

The brokerage expects RoE (Return on Equity) to improve to 11.7% in FY24E versus only 6.1% in FY21 and maintains a Buy on Tata Power with a revised price target of Rs 315 per share, (15% upside). At current market price, the stock is trading at 3.3x/3x FY23E/FY24E P/BV. 

At around 10:42 am, the stock was trading around 4 per cent higher to Rs 284.35 per share on the BSE as against a 1 per cent decline in the S&P BSE Sensex. In the last year, it has surged 172 per cent on the BSE as compared to over 21 per cent rise in the S&P BSE Sensex.