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On Thursday, CLSA reiterated its underperform rating on Tata Power (TPWR:IN), maintaining the price target at INR351.00. The firm’s analyst, Bharat Parekh, pointed out that Tata Power’s fourth-quarter financial year 2025 results were disappointing. The underperformance was primarily due to challenges in its Indonesian coal mines, the renewable energy independent power producer (IPP) business, and Tata Projects. This resulted in a 5% year-over-year decrease in Tata Power’s reported consolidated net profit.
The profitability of Tata Power’s renewable energy IPP business was significantly affected in FY25, with a 10% decline from the previous year, despite a 23% increase in capacity. The downturn was attributed to lower wind utilisation rates and climbing interest rates. Additionally, the coal segment’s profit per ton halved compared to the previous year, impacted by a reduction in seaborne coal prices.
Despite these setbacks, there was a positive aspect to Tata Power’s business performance. The solar module segment experienced success, benefitting from India’s ban on solar module imports, which has been a boon for domestic producers.
CLSA emphasized that even though Tata Power’s stock price has remained flat year-to-date, the current valuation is steep at 26 times the forecasted FY26 earnings. Furthermore, the stock appears to factor in a significant growth premium of Rs168 billion, which contributed to the decision to maintain the underperform rating.
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