Tata Power Company Ltd, one of India’s largest integrated power companies, is aggressively expanding its renewable energy portfolio. With 44.84 lakh small retail investors as of September 2024, the company has laid out ambitious targets:
- Revenue Growth: 1.6x FY24 revenue to ₹1 lakh crore by FY30.
- EBITDA Target: 2.4x increase to ₹30,000 crore by FY30.
- Profit Target: 2.5x growth to ₹10,000 crore by FY30.
- Capex Plans: ₹1.46 lakh crore over FY26–30, primarily for renewable energy, transmission, and storage.
Key Growth Drivers
- Renewable Energy Focus:
- Tata Power targets 23GW of clean energy capacity by FY30, contributing 60% of its planned capex.
- Solar rooftop revenues are projected to grow at a 36% CAGR from FY24–30.
- Solar Cell and Module Manufacturing:
- The company’s 4.3GW manufacturing plant in Tirunelveli, Tamil Nadu, has commissioned an additional 2GW capacity.
- Tata Power aims to capture a significant share of PM Surya Ghar Yojna, targeting 30 lakh households.
- Power Purchase Agreements (PPAs):
- Tata Power has secured PPAs for 90% of its 5.6GW RE pipeline, with the remaining expected by FY25E.
- Land and Transmission Infrastructure:
- 100% of its projects have land visibility, with 40% already acquired.
- 80% of transmission lines are secured, with the remainder expected by FY25E.
Financial Performance and Valuation
| Metric | FY24 (Actual) | FY30 (Target) |
|---|---|---|
| Revenue | ₹62,500 crore | ₹1,00,000 crore |
| EBITDA | ₹12,500 crore | ₹30,000 crore |
| Profit | ₹4,000 crore | ₹10,000 crore |
| Capex (FY26–30) | ₹50,000 crore | ₹1.46 lakh crore |
Analyst Views
- Nuvama: Retains a ‘Reduce’ rating with a target price of ₹372, implying a 16% downside from its current price of ₹440.65. The valuation reflects concerns over execution risks and stretched market valuations.
- Market Performance: Tata Power shares have surged 32% in 2024, reflecting strong investor interest in renewable energy projects.
Risks and Challenges
- Execution Risks:
- Land acquisition and transmission infrastructure for projects must align with ambitious timelines.
- High Debt Levels:
- Despite growth, maintaining a stable balance sheet and debt level is critical.
- Valuation Concerns:
- With a 17x FY27 EV/EBITDA valuation, the stock could face near-term corrections.
- Dependence on Government Initiatives:
- Nuclear power and other policy-driven projects depend on timely government actions.
Conclusion: Buy, Hold, or Sell?
Investors with a long-term horizon should consider holding Tata Power shares, given its strategic focus on renewable energy and strong growth potential. However, current valuations may deter fresh investments. Analysts recommend adding on dips to capitalize on its ambitious clean energy goals.
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Disclaimer:
This article is for informational purposes only and does not constitute financial advice. Readers should conduct their own research or consult a financial advisor before making investment decisions.