Tata Power to outperform the sector, says Antique Broking; raises target price on stock

livemint.com:

₹1 lakh crore. Antique Stock Broking raised the target price of Tata Power shares as it believes the company will outperform the sector for three crucial reasons. The brokerage firm maintained a ‘Buy’ rating on the stock and revised the target price to ₹450 per share from ₹422 earlier, implying an upside of more than 32% from Tuesday’s closing price.

It has not factored in the growth of regulated equity, where the company is exploring all possibilities. Also Read: Why Tata Power share price is skyrocketing in FY24 — explained with five crucial reasons “We have added the scope of potential windfall gains from spot market sales from CGPL, assuming PPA negotiations fail through. We assume this could be 30% of total PPA, which is exposed to Punjab, Haryana and Rajasthan," said the brokerage.

Antique Stock Broking listed out three reasons why it expects Tata Power to outperform the industry. Firstly, it believes Tata Power CGPL, even under section 11, continues to break even because its share in coal profits is adjusted against tariff. Moreover, consolidated RE can deliver ₹100 billion EBITDA by FY27 as against ₹34 billion in FY24E.

Also, lowest capital outlay/MW for pumped hydro entails higher platform valuation. (Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!) Tata Power houses 4.3 GW of operational solar, wind, and hybrid assets. Tata Power plans to add 10 GW before FY27E.

This will entail a capex of ₹600 billion. “14 GW can contribute ₹84 billion in EBITDA. Add solar EPC, rooftop, and EV charging stations, consolidated RE can easily march past ₹100 billion.