Is Tata Power A Good Buy?

Tata Power‘s share price has made quite a recovery at the bourses after a dismal start of the year. Till March 2023, shares of the company had slumped around 10% YTD and the Tata Power share price even touched its 52-week low.

However, the Tata Group company bounced back from the lows, going up over 40% from the March lows. The company’s June quarter results also beat Dalal Street estimates. So, is it the right time to invest in the energy behemoth? Is Tata Power a good buy now? In this article, we provide you with the info you should consider before making that decision.

Tata Power Company History

Tata Power is one of the oldest companies of the Tata Group. Tata Power was formerly a part of the three entities jointly known as Tata Electric Companies. The company in its current being came into the 2000s when three different Tata Group companies, Tata Hydro-Electric Co. Ltd., The Andhra Valley Power Supply
Co. Ltd., and Tata Power Co. Ltd.
, were amalgamated into one entity — The Tata Power Company Limited.

The energy company that has been operational for over a century now has a generation capacity of 14,076 MW. The company currently distributes to over 12 million customers. The company has also been increasing its focus on renewable energy. Currently, 37% of its power generation output comes from clean energy sources.

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Tata Power Shareholding Pattern

As of June 2023, promoter holdings in the stock stood at 46.86%. Foreign Institutional Investors held a 9.75% stake in the company. Public shareholding stood at around 28.47%. Mutual Funds held around 3.05% shares of the company.

During the June quarter, the company also saw Life Insurance Corporation of India increase its stake. As per exchange data LIC bought another 3 crore shares of the company. It now holds an 8.47% stake in the company.

Tata Power Fundamentals

In the June quarter, the Tata Group company's consolidated net profit for the period was up 22.39% to reach ₹972.5 crore as against the ₹794.6 crore profit it booked in the year-ago period. The number also beat consensus estimates of around ₹750 crore. The energy giant's revenue from operations went up 4.5% to ₹15,213.3 crore compared to 14,495.5 crore in the June quarter of 2022.

The company's EBITDA went up 74% year-over-year to ₹2,943.6 crore. EBITDA margin for the period came in at ₹19.35%. Basis earnings per share for the quarter came in at ₹3.04.

Past Three Years

The company’s numbers have been on an uptick for the last three years. The company’s consolidated revenue from operations in FY21 stood at ₹32,468.1 crore around an 11.8% YoY increase. The number climbed up 31.87% YoY in FY22 when the company posted revenue of ₹43,735.6. In FY23 the company posted revenues of ₹42,655.3 Crore as of the end of the December quarter.

Talking about the company’s net profits, the energy giant net profits stood at ₹1,127.4 Crore in FY21, up around 11% YoY. Net profits saw a massive 54% YoY jump in FY22 to ₹1,741.5 Crore. In FY23, the company has already booked profits of ₹2,558 crore by the end of the third quarter. The company’s basic earnings per share (EPS) stood at ₹5.4 at the end of FY22.

Tata Power Analyst Ratings

Brokerages had a mixed reaction to the company’s June quarter earnings. Here are the latest analyst calls on the stock.

AnalystRatingTarget Price
CLSASell195
HSBCHold230
SharekhanBuy265
All numbers are in ₹.

Global brokerage firm CLSA said that the quality of results remains challenging as one-off items drove PAT. The analysts also added that at current valuations the stock is expensive. HSBC said that the expected declines in coal prices alongside increased deployment of new renewable energy installations are projected to restrain the growth of reported earnings for FY24 in comparison to FY23. Moreover, recent investments made by private equity (PE) entities in the renewable energy sector appear to have already factored in the complete valuation of the renewable portfolio, leaving minimal room for immediate short-term upside potential.

On the other hand, domestic brokerage firm Sharekhan noted that the Tata Group company’s adjusted profit after tax (excluding extraordinary gains) amounted to ₹738 crore, marking a 7% decline year-on-year. However, this figure exceeded the analyst’s estimates of ₹640 crore by 15%. The firm also added that Tata Power has a strategic roadmap in place to transition towards sustainable energy sources, with a goal of achieving a fourfold increase in its PAT by FY2027E in comparison to FY2022.

Tata Power Dividend History

The power company has been pretty consistent with dividends. The company has paid dividends each year for the past 12 years. Since 2010, the company has given out a total dividend of ₹31.3. The most recent dividend was for the year ended March 2023. The company declared a final dividend of ₹2/share.

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Posted In: EquitiesEducationMarketsGeneralenergy stocksTata GroupTata Power