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On Thursday, Investec (LON:INVP) analyst Anuj Upadhyay adjusted the price target for Tata Power (TPWR:IN), reducing it to INR 421.00 from the previous INR 467.00, while continuing to recommend a Hold rating on the stock. The revision follows Tata Power’s latest financial performance, which showed an 8.2% year-over-year increase in profit after tax (PAT) to Rs 10.3 billion, surpassing Investec’s expectations. This growth was primarily driven by a Rs 4.8 billion profit in its Mundra, Coal, and shipping segments, compared to Rs 890 million in the third quarter of the fiscal year 2024. The increase in profits was attributed to higher plant load factor (PLF) and regulatory benefits, as well as improved margins in the engineering, procurement, and construction (EPC) sector.
However, the financial gains were somewhat dampened by the shutdown of Unit-5 of the Mumbai generation business, a decline in EPC execution, a drop in renewable energy solutions (RES) PLF, and lower joint venture profitability. Tata Power has also made progress in the transmission sector, winning four bids worth Rs 71 billion as of the first nine months of fiscal year 2025. Out of these, two projects began in the second half of fiscal year 2025, and the remaining two are set to start in fiscal year 2026. Additionally, the company has fully commissioned a 4.3 GW solar module/cell manufacturing plant.
Looking ahead, Tata Power has set targets to add 2.5 GW per annum of RES capacity and to execute Rs 135.6 billion worth of EPC work over the fiscal years 2025 and 2026. Investec’s revised estimates take into account a lower EPC execution rate, slower RES capacity additions, reduced profitability of Tata Project, but are offset by higher EPC margins and strong performance at Mundra. This recalibration has led to a new sum-of-the-parts (SoTP) target price of INR 421, reflecting a cautious stance on the company’s future performance across its various business segments.
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