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Strong earnings momentum to continue

* Strong 1QFY27: Tata Power (TPWR) reported revenue of INR190.5b, 4% above our estimate. EBITDA came in at INR40.1b, 6% above our estimate. Adj PAT beat our estimate by 9%, reaching INR11.8b. The strong results were driven by healthy performances in the solar cell & module manufacturing and the Indonesian coal mining businesses.

* Key things we liked:

1) Solar manufacturing business revenue/EBITDA grew to INR24.6b/INR6.2b (+53%/+113% YoY), aided by better realizations and higher external sales (over 63% of modules and 50% of cells sold to third parties)

2) share of profit from JVs & associates jumped 86% YoY to INR2.4b, led by the Indonesian coal mining business

3) TBCB projects remained on track, with the Khurja line COD expected shortly and the Bikaner line by Oct'26

4) rooftop installations rose 37% YoY to 371MWp in 1QFY27, and management targets to increase market share from 12–13% currently to ~25% over the medium term, supported by the launch of BESS solutions

5) Bhivpuri PSP (1GW) remains on track for CY29 commissioning with one 330MW unit securing a SECI bid, while discussions are underway with Tata Steel and other customers.

* Key monitorables:

1) the pace of RE commissioning with unchanged FY27 guidance of 2.5-2.7GW (0.2GW was commissioned in 1QFY27),

2) for the Mundra SPPA approval pending from four states, approval from three is expected by Aug'26 and from the fourth one by Sep'26

3) capex run rate, since for FY27, the guidance is maintained at INR250b (50% earmarked for RE projects) and 2QFY27 capex is likely to exceed INR60b.

* Valuation and view: We value the regulated business at 2.5x regulated equity; the coal segment is valued at 1x book value; the renewables segment is valued at 12x FY28E EBITDA; the pumped storage segment and other segments are valued at 1x P/B and cash; and investments add INR69/share. The sum of these contributions results in our TP of INR454.

Coal and solar cell manufacturing drive beat

* TPWR’s consolidated revenue was 4% above our estimate at INR190.5b (+6% YoY, +28% QoQ).

* EBITDA came in at INR40.1b (-3% YoY, +54% QoQ), 6% above our estimate.

* Adj PAT beat our estimate by 9%, reaching INR11.8b (+11% YoY, +10% QoQ).

* The strong results were driven by robust performance in the solar cell and module manufacturing business, along with the Indonesian coal mining business.

* Solar cell and module revenue/EBITDA grew to INR24.6b/INR6.2b (+53%/+113% YoY), aided by better realizations and higher external sales (over 63% of modules and 50% of cells sold to third parties).

Valuation

* The valuation of TPWR is segmented across various business units:

* The regulated business is valued using a 2.5x multiple on regulated equity.

* The coal segment is valued at 1x book value.

* The renewables segment is valued at 12x FY28E EBITDA.

* The pumped storage segment and other segments are valued at 1x PB. Cash and investments add INR69/share.

* The sum of these contributions results in a TP of INR454/share, reflecting the comprehensive valuation of TPWR’s diverse business segments.

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