Tata Power, the electricity generation company, has seen a sharp uptrend in the recent past, with the share price setting consecutive all-time high records in the last three sessions. Driven by a sustained rally, the market capitalisation (m-cap) of the integrated power company crossed the crucial ₹1 lakh crore mark and became the second group company to achieve this milestone this week after Trent. This is the sixth Tata Group company that has an m-cap of over ₹1 lakh crore after Tata Consultancy Services (TCS), Titan Company, Tata Motors, Tata Steel, and Trent.

Tata Power shares experienced a remarkable rally in the calendar year 2023, rebounding 83.6% in the last eight months from its 52-week low of ₹182.45 touched on March 28, 2023, to hit a new record high of ₹335.8 on December 8, 2023.

With an m-cap of ₹1.04 lakh crore (at the end of trade on December 7), the power heavyweight has given more than 40% in the last one year, while it surged 57% in the calendar year 2023. In comparison, the BSE Sensex and BSE Power index rose 11% and 23%, respectively, in the past 12 months; and 14% and 31%, respectively, in the calendar year 2023.

The Tata Group company has also a good track record of dividend payment and has been consistently rewarding its shareholders for the last 5 years. For the year ending March 2023, Tata Power declared an equity dividend of 200% amounting to ₹2 per share, while it has paid 24 dividends since 2001. At the current share price, the dividend yield stands at 0.61%.

For the September quarter of FY24, Tata Power posted a consolidated net profit of ₹1,017.41 crore, up 8.79% year-on-year over ₹935.18 crore last year. During the quarter, the company generated 84% profit from the core businesses, while the contributions from overseas JVs, including coal mining operations, continued to decline. The consolidated revenue grew 9% to ₹15,442 crore in Q2 FY24 against ₹14,163 crore in Q2 FY23. On the operating front, the earnings before interest, taxes, depreciation and amortisation (EBITDA) surged 51% YoY to ₹3,087 crore.

As of September 30, 2023, Tata Power’s clean energy portfolio achieved the milestone of 5,500 MW, standing at 38% of total installed generation capacity. It also made significant progress in its distribution business by improving its cash flow and reducing AT&C losses in Odisha. Further, it is well-poised to capitalise on the pumped hydro storage projects and has signed a pact with the Maharashtra government for the development of 2,800 MW projects, with a proposed total investment of around ₹13,000 crore.

Early this month, in an analyst meeting at its Bhivpuri Hydro capacity in Maharashtra, the company gave an aggressive target to double its revenue and profit by FY27 at a capital expenditure of ₹60,000 crore in the next four years. Out of which, 45% will be spent on renewables during FY24-27.

In a fresh development, JM Financial has upgraded its stance on the stock to ‘Buy’ with a  target price of ₹350, indicating a potential upside of 24% from current levels. “Tata Power's recalibrated strategy involves tapping high-margin group captive RE (renewables) opportunities, exiting low-value businesses, venturing into brownfield pumped hydro storage, and expanding transmission business beyond distribution. This, coupled with the visible resolution of the Mundra issue, positions the company for accelerated growth,” the domestic brokerage says in a report released on December 7.

The agency expects revenue, EBITDA, and PAT to grow at CAGR (Compound Annual Growth Rate) of 15%, 23%, and 32%, respectively over FY23-26, supported by an increasing asset base and improved margin profile.

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