This multibagger Tata Group stock gains 4%; ICICI Securities sees potential upside of 19%

Tata Group’s utility company Tata Power Company in Tuesday's trade (May 14, 2024) gained nearly 4 per cent at day’s high to Rs 426.80. The spurt in the stock is likely triggered after domestic brokerage ICICI Securities resumed coverage on the counter with a ‘buy’ call and target price of Rs 490 per share. The suggested target implies a potential upside of 19 per cent from the previous day’s closing price.

At 2:41 pm, shares of Tata Power traded higher by 3.3 per cent at Rs 425.50 apiece on the BSE. The stock over the past year has scaled higher by 108 per cent.

In its report dated May 13, the brokerage firm said that the company is setting up one of the best RE or renewable energy platforms– a mix of asset-light and asset-heavy businesses. Recognizing it as one of the most comprehensive RE platform within its coverage universe, the brokerage estimates the company to grow its RE capacity to 2x in the next two years. 

Furthermore, the company is the largest private sector discoms in the country. Given its experience in the distribution segment, parallel licensing will be a huge boost for the company to grow its customer base, noted the report. 

Amid the policy revamp by the government to give a boost to the solar rooftop segment with higher subsidy and 40 GW target over the next couple of years, the brokerage estimates a 2GW rooftop market and a profit of Rs 700 crore by FY26 for the company. The company has a 13 per cent market share in the rooftop solar market.

In addition, the company also enjoys the first-mover advantage in the electric vehicle (EV) charging market. 

The brokerage values the renewables business, including pumped storage projects, at Rs 1.04 lakh crore. The key downside risk, however, as cited by ICICI Securities is a delay in the execution of RE projects.

Tata Power Q4FY24 results

Tata Power reported an adjusted profit of Rs 800 crore, up 5 per cent on-year in Q4FY24 and Rs 3200 crore in FY24. The muted profit growth was due to low international coal prices.

About Tata Power

Tata Power is an end-to-end power solutions company with presence across generation to distribution to trading and from solar manufacturing to solar utility scale and rooftop EPC.