Tata Stock Sinks 4% After Q3 Print, Brokerages Forecast Further Downfall

Tata Power‘s shares continued to slump for the second straight session as the company’s December quarter results disappointed investors and analysts.

What Happened: The Tata Group company posted a 2.28% increase in its consolidated net profit for the December quarter, compared to the same period last year. The company’s net profit stood at ₹1,076.12 crore, rising from ₹1,052.14 crore in the corresponding period of the previous year.

The company’s revenue from operations witnessed a growth of 3.69%, reaching ₹14,651 crore, as opposed to ₹14,129.12 crore recorded in the same quarter of the previous year. The power company’s EBITDA surged by 20% to ₹3,060.55 crore from ₹2,607.61 crore.

The power giant attributed its robust financial performance to a combination of factors, including a strong balance sheet, operational efficiency, and synergies across its business segments.

As of December 31, 2023, the company’s operational capacity in the renewables segment stood at 4,270 megawatts. Furthermore, with 4,752 megawatts of projects under Tata Power Renewable Energy Limited (TPREL) and 4,120 megawatts under Tata Power Solar Systems Limited (TPSSL) under execution, the total clean energy capacity is poised to exceed 10,000 megawatts within the next 12-24 months.

The company aims to achieve approximately 70% of its capacity from non-fossil-based fuels by 2030.

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Analyst Reactions: CLSA maintained its “sell” rating for the stock but raised the price target to ₹249 from ₹240. The brokerage said that the company’s profit after tax missed estimates by 18%.

Citi also maintained its “sell” rating for the stock and slashed the target price to ₹253 from ₹291. The brokerage said that the company’s valuation is too expensive.

Nuvama downgraded the stock’s rating to “reduce” from “hold” with a price target of ₹303. The domestic brokerage expects the company to exhibit a relatively stagnant to modest growth trajectory over FY24-25. This projection is attributed to the declining coal realizations, coupled with the expectation that the increased contribution from renewable energy sources will take approximately two to three years to fully materialize.

Morgan Stanley also maintained its “underweight” call on Tata Power with a price target of ₹213. The analysts said that the company’s quarterly results missed estimates due to slower growth in the regulated business and lower margins in utility-scale renewable. The brokerage also added that the commissioning of renewable energy projects remained sluggish.

Kotak Securities also maintained its “sell” rating for the stock with a price target of ₹240. The brokerage said that going forward, the consolidated earnings of the company are anticipated to face a downturn due to reduced coal profits. The analysts also added that the company’s net debt experienced an upswing during the quarter, primarily due to heightened capital expenditure (capex) outlays.

Price Action: Tata Power’s share price was down 3.67% to trade at ₹377.70 as the markets opened on Monday.

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