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Ambitious investments and strategic expansion drive growth

* We attended Tata Power’s analyst meet, where the company showcased its 4.3GW cell and module manufacturing facility at Tirunelveli in Tamil Nadu. The event was also attended by senior management from the company. Our key takeaways: 1) management showcased its vision to double EBITDA and PAT (before minority) to INR300b and INR100b by FY30, respectively; 2) by FY30, TPWR expects the share of renewables in PAT to rise to ~50% (FY24: 21%), while the share of conventional generation and coal, which now account for ~44% of PAT, will decline to ~11%; 3) capex is estimated to rise to INR1,460b in the next five years, ~3x the capex over the last five years.

* While the company had provided similar guidance last year as well, below are the key takeaways that stood out for us: 1) capex for FY26-27 was raised to INR250-260b p.a. from INR220-230b; 2) TPWR provided greater granular details at project and capacity levels this time (especially for T&D, cell & module manufacturing, and RE generation), which enhances visibility as to how the revenue and EBITDA targets will be achieved; 3) COD for 2.8GW of pumped hydro projects has been deferred slightly by 6-12 months; 4) the operational green capacity target for 2030 was raised to 23GW (from 20GW previously) while the under-construction pipeline has now expanded to 10GW (from 3.7GW earlier), and 5) land, PPA, and transmission connectivity for the RE pipeline remain solid.

* Segment-wise guidance provided is as follows: 1)cell and module manufacturing: both cell and module production are expected to ramp up to 4GW by FY26 (1/1.8GW in 2HFY25 for cell/module); 2) pumped storage and hydro-power: construction at 1GW Bhivpuri PSP and 1.8GW Shirwata PSP is likely to commence in CY25; TPWR also outlined additional hydro potential in Bhutan of up to 15GW vs. the 5.1GW MoU signed with Druk Green Power; 3) T&D: transmission and distribution remain the key focus areas for the company with a plan to double operational capacity to 10,500 cKm by FY30 (from 4,633 cKm now), and Odisha regulated equity to nearly double by FY30; in distribution, TPWR aims to expand the customer base to 40m by FY30 (from 12.5m now) and the company outlined Rajasthan, UP, Assam, Andhra Pradesh, and Andaman & Nicobar, where active discussions are ongoing with respect to distribution-related opportunities; and 4) green generation capacity: while the company has 6.7GW green operational generation capacity, ~10GW remains under construction, and the FY30 vision is to reach ~23GW in operational green capacity.

* We reiterate our BUY rating on the stock with an SoTP-based TP of INR509.

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