Buy Tata Power Company Ltd For Target Rs. 475 By JM Financial Services
2QFY26: Broad-base strong performance; Mundra hope remains
Tata Power (TPWR) reported 2QFY26 net consol revenue of INR 155bn (-1% YoY, -3% JMFe, - 5% Cons.) and EBITDA of INR 35bn (7% YoY, 10% JMFe, 2% Cons.) due to regulatory income of INR 2.2 bn. Adj. PAT stood at INR 9.2bn (-1% YoY, 20% JMFe, -2% Cons). The stabilization of 4.9 GW integrated solar cell and module manufacturing (928 MW/970 MW output of Cells/ modules in 2QFY26), the acceleration in rooftop solar (order book exceeds INR 10 bn), strong performance at Odisha discoms (PAT grows 4x YoY), the expected signing of PPA for Mundra by Nov-end, the initiative to set up a 10 GW ingot and wafers facility and many more (pumpedhydro, Bhutan hydro) all contribute to our continued positive outlook on the company’s gradual and steady progress. We estimate company to report FY25-28 CAGR of 8%/15%/12% in Revenue/ EBITDA/ PAT. We maintain BUY, with a SOTP-based TP of INR 475 (+20% upside) implying 12.3x EV/EBITDA and 2.8x P/B on FY27.
* Financial Performance: Tata Power reported revenue of INR 155bn (-1% YoY) and Adj. PAT of INR 9.2bn (-1% YoY). Company’s standalone business reported revenue / PAT of INR 26bn (-5% YoY) / INR 4.3bn (-57% YoY) due to shutdown of Mundra plant. Odisha / Delhi distribution business reported robust performance, with PAT of INR 1.8bn / INR 3.1bn vs. INR 380mn / INR 2.9bn in 2QFY25.
* 4,150 MW Mundra UMPP: Company was supplying power from the Mundra Power Plant till Jun’25 under Section 11 of the Electricity Act, 2003. Subsequently with effect from 3rd Jul’25, Company has temporarily suspended operations of the plant to undertake pending overhauling activities aimed at resolving existing technical issues. Further, company is currently in discussion with procurers for execution of a Supplementary Power Purchase Agreement (SPPA) for the plant. Management sounded confident of signing the PPA with Gujarat for partial capacity by end of Nov’25.
* Solar cell/ module manufacturing: The 4.3GW cell and module manufacturing plant has produced modules of 970 MW in 2QFY26 vs. 879 MW in 2QFY25. Cell production stood at 928MW vs. 904MW in 1QFY26. The manufacturing unit reported Revenue/ EBITDA/ PAT of INR 17bn/ INR 5bn/ INR 2bn in 2QFY26 vs. INR 14bn/ INR 1bn/ INR 660mn in 2QFY25. Interest cost and depreciation for the facility has increased by 3x YoY and 6x YoY due to higher borrowings and capitalisation of assets. It is also evaluating plans to setup 10GW ingot and wafer manufacturing facility.
* Renewables: Renewable business reported EBITDA / PAT of INR 9bn (3% YoY)/ INR 870mn (- 52% YoY) in 2QFY26. It has added just 205 MW RE capacity in 1H due to focus on completing 3 rd party EPC contracts. Subsequent to this, it expects to add 1.3 GW in 2HFY26. With this, the installed RE capacity increased to 5,746MW (1030MW/ 4,715MW of Wind/ Solar) vs. 5,029MW (1030MW/ 3,998MW of Wind/ Solar) as on Sep’24. Avg. CUF for wind/ solar stood at 30.4% / 18% vs. 31.6% / 20.5% in 2QFY25. Around 5,849MW (679MW/ 3049MW/ 45MW/ 2,176MW of Solar/ Hybrid/ Wind/ FDRE) of capacity is under construction. Going forward Management expects annual capacity addition of 2-2.5 G
* Rooftop Solar: Solar EPC business reported revenue of INR 27bn (-11% YoY) with expansion in EBITDA margin to 11.3% in 2QFY26 vs. 8.0% in 2QFY25 due to higher execution of third party projects. The solar rooftop business continues to witness traction, with revenue of INR 11.3bn in 2QFY26 (vs. INR 4.4bn in 2QFY25) and order book of INR 11.2bn. Company has installed 370MWp rooftop solar in the quarter.
* Hydro projects: The development process of 1000 MW Bhivpuri PSP and the 1800 MW Shirawata PSP continues with an investment of INR 57bn and INR 78.5bn. CEA and all other statutory approvals for Bhivpuri PSP have been received and construction work has started. Company expects to complete the project by Aug’28. Construction of Shirwata PSP is expected to start by Nov’25. The construction at 600 MW Khorlochhu Hydro project in Bhutan (part of a broader 5 GW clean energy MoU with Bhutan) has also started which is expected to commission in Sept’29.
* Transmission & distribution: Company’s transmission portfolio now stands at 7,085 Ckm, including 4,659 Ckm commissioned and 2,426 Ckm under construction. Currently, company serves ~13mn customers in distribution segment. Company is actively pursuing bidding for privatisation of Uttar Pradesh discoms. However, management appeared uncertain about the timelines for the process.
Other key highlights
* TPREL signed an agreement with Suzlon Group for the supply of 838 MW of wind turbine generators
* TPREL secured key EPC and storage contracts — including TPC-D’s 100 MW/200 MWh BESS (~ INR 3bn), NTPC Khavda’s 300 MW BOS (INR 5.2bn), and its first BESPA with NHPC for a 30 MW/120 MWh system in Kerala.
* Installed ~9.5 lakh smart meters in 2QFY26; cumulative installations across Discoms exceed 4.1 million
* Prayagraj Plant (PPGCL) achieves 98% YTD plant availability. Highest ever since inception.
* Company has incurred capex of INR 75bn in YTDFY26 and has a capex target of INR 250bn in FY26.
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SEBI Registration Number is INM000010361
