Broker's call: Tata Power (Buy)

BL Chennai Bureau | Updated on: Apr 28, 2022

Maybank

Target: ₹300

CMP: ₹248.35

We initiate coverage on Tata Power, India’s leading private utilities company, with a Buy and SOTP-based TP of ₹300. Tata Power is: transforming itself into a RE utility targeting 60 per cent share of clean energy by 2025 and 80 per cent by 2030; tapping the large regulated distribution privatisation opportunity; tapping the EPC solar market, electric vehicle (EV) charging and government subsidies on solar pumps and solar roofs; and reducing debt, selling non-core assets and value unlocking in carved-out RE assets.

With specific environmental targets for 2025-30, Tata Power has pledged for carbon-neutral status before 2050.

Our thesis is based on positive developments arising from fresh opportunities in the distribution business, strong growth in the renewable segment and resolution of Mundra, and tax-saving benefit emerging from the merger of Mundra with the parent company.

We value its regulated business on the basis of P/BV by assigning a multiple based on the segmental RoE generated by projects. We value the renewables business on P/E and assigning a 32x multiple premium to peers listed overseas due to a more integrated offering.

Published on April 28, 2022
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