IGI Logo

TATA POWER COMPANY LTD

Buy TATA POWER COMPANY LTD at CMP: Rs 402.6 | Target: Rs 434 (8%) | SL: Rs 385

Investment Rationale

* Market Leadership in High-Margin Renewable Manufacturing and Rooftop Solar: The company’s 4.3 GW solar cell and module plant in Tirunelveli has fully stabilized, reporting an EBITDA margin of approximately 27-28% in recent quarters. By prioritizing internal consumption for its own utility-scale projects and high-demand segments like rooftop solar, the company captures a greater share of the value chain. To further de-risk its supply chain and improve margins, the company is evaluating a 10 GW ingot and wafer manufacturing plant. Further, the rooftop solar business has seen exponential growth, with PAT increasing by 390% in Q2 FY26 compared to the previous year.

* Proven Turnaround Capability and Stable Returns in Distribution: The company has demonstrated a unique ability to transform inefficient state-run distribution entities into profitable ventures, creating a steady, regulated cash flow base. The turnaround of the Odisha Discoms is a primary growth driver; PAT for these entities jumped to Rs505 crore in the first nine months of FY26, compared to Rs164 crore in the same period the previous year. Beyond distribution, Tata Power is aggressively growing its transmission portfolio through Tariff-Based Competitive Bidding (TBCB) projects, such as the Koteshwar-Rishikesh line and the Hinjewadi project.

* Strategic Transition to Round-the-Clock (RTC) Green Energy: Tata Power is aggressively diversifying its asset base to provide sustainable 24/7 clean power, aligning with India's decarbonisation goals and corporate demand for "Green RTC" energy. The company has commenced work on the 1,000 MW Bhivpuri pumped hydro project and is expanding into Bhutan with the 600 MW Khorlochhu and 1,125 MW Dorjilung projects. Despite a massive Rs25,000 crore annual CAPEX plan, Tata Power maintains a conservative balance sheet with a net debt-to-underlying EBITDA ratio of 3.3 to 3.4 and stable credit ratings, ensuring it can fund its ambitious goal to double PAT and EBITDA by FY30.

* Valuations: We model a Revenue/PAT CAGR of 15%/15% and estimate TATAPOWER to clock PAT of Rs 6,244 Cr by FY28E. TATAPOWER is trading at forward P/E(x) of 20.4x and we value at 21.8(x) FY28E and Recommend BUY on TATAPOWER with TP Price of Rs. 434 (8%).

Observation

* Since 2020, the stock has been in a robust structural uptrend. During this phase, it has undergone periodic consolidations, followed by breakouts that led to a continuation of the primary trend.

* A similar price action has emerged in the current month, with the stock breaking out of a triangular pattern, indicating a resumption of the uptrend.

* On the weekly timeframe, volumes have surged above the 20-week average, supporting the breakout.

* Additionally, the RSI is hovering near the 60 mark and trending higher, signaling sustained bullish momentum.

* Given this robust alignment across multiple timeframes, the stock looks poised to advance toward an upside target of 434, while a closing-basis stop loss at 385 is advised to manage risk effectively

SEBI Registration number is INH000000081.

Please refer disclaimer at https://geplcapital.com/term-disclaimer