Target: ₹277

CMP: ₹241.30

Tata Power reported ₹11,000 crore in revenue, up 45 per cent y-o-y, led by addition of Odisha Discoms and strong performance in TPSSL. The operating profit was at ₹1,700 crore, down by 8 per cent y-o-y, due to lower margin profile of Odisha Discom.

In an U-turn, Tata Power Solar Systems Ltd reports 5 per cent net margin as against 2 per cent in sequential quarter. Meanwhile, the consolidated other income was at ₹100 crore, flattish y-o-y. As we have been highlighting that the key beat was led by share in associates/JVs, which was ₹660 crore, up 4.4x led solely by higher coal prices in subs.

The net profit, thereby, was at ₹550 crore, up 74 per cent annually. In 9M-FY22, Tata Power ends net profit at ₹1,520 crore, up 58 per cent y-o-y.

The past capital allocation was driven by 39 per cent in coal/CGPL, 32 per cent in regulated business and 29 per cent in renewables. The path ahead will have 49 per cent of regulated business (with 31 per cent coming from T&D) and 32 per cent in renewables.

Based on the current capital allocation, we use SOTP to value regulated, generation and other businesses at ₹277/share.

Risks: sharp decline in coal prices impacting subs, slower resolution on CGPL, poor exit multiples in InvIT, and systemic slowdown in RE space.

Published on February 10, 2022