How are energy investors positioned?
On Wednesday, Tata Power (TPWR:IN) saw its price target increased to INR500 from INR490 by ICICI Securities, with the firm maintaining a Buy rating on the stock.
The adjustment follows Tata Power's reported adjusted profit of INR 10 billion for the first quarter of the fiscal year 2025, marking a significant rise from INR 7.4 billion in the same quarter of the previous year.
The improved financial results have been attributed to several factors. Notably, the operational and financial performance of the Mundra project showed considerable progress, with availability increasing to 81% compared to 54% in the prior year, and utilization rising to 71% from 41%.
Additionally, Tata Projects contributed to the earnings through associate income, though this was somewhat offset by a weaker gross spread of coal impacting the performance of the company's Indonesian mine.
During the first quarter, Tata Power also secured contracts for the supply of a 0.6GW module from its new manufacturing facility and won a new transmission project valued at INR 25 billion.
Despite these achievements, the company did not see growth in its pipeline of renewable assets, and its Engineering, Procurement, and Construction (EPC) order book remained static at INR 132 billion.
ICICI Securities anticipates that Tata Power's near-term earnings will be bolstered by its solar manufacturing and rooftop solar segments. The firm's valuation is based on a sum of the parts (SOTP) methodology, which supports the raised price target of INR 500 per share. The analyst's statement highlighted the key drivers behind the company's current valuation and the expectations for its future performance.
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