Tata Power Co. Ltd. delivered robust financial results for Q1 FY27, with consolidated net profit rising 11% year-on-year to ₹1,176 crore compared to ₹1,060 crore in the same quarter last year. According to ET Now, the company's revenue from operations increased by approximately 6% YoY to ₹19,051 crore, up from ₹18,035 crore in the previous year. EBITDA grew by 8% to ₹4,249 crore, while total income reached ₹19,439 crore, marking a 6% increase compared to the previous year. However, Earnings Per Share (EPS) declined from ₹4.26 to ₹4.12 during the quarter.
Tata Power shares gained over 1% in Thursday's trade after Nuvama upgraded the stock to 'BUY' from 'HOLD' with a Bull Case target price of ₹421, implying around 14% upside from the current market price of ₹368.70. The brokerage upgraded the stock after the stock corrected around 8% following the adverse Kleros arbitration ruling, with the immediate overhang now largely priced into the stock. Nuvama estimates a potential cash outgo of $490-640 million, or around ₹20 per share, but believes the arbitration overhang is now largely priced in. The brokerage noted that the current market price "factors near-term risks but leaves medium-term growth optionality unpriced."
Tata Power's 2.8 gigawatt pumped storage project portfolio represents a significant value opportunity, with timely commissioning expected to add around ₹600 crore in annual cash flow. Nuvama has assigned ₹14 per share for the pumped storage portfolio in its Bull Case, expecting these projects to become more important as the market looks towards FY29 and beyond. The brokerage values the company's existing Transmission System Strengthening through Tariff Based Competitive Bidding (TBCB) work-in-hand at around ₹12,500 crore, assigning ₹19 per share for this existing pipeline. Additionally, Nuvama's Bull Case does not include future transmission wins, which it estimates could add another ₹19-20 per share over and above the current valuation. The brokerage sees potential from Tata Power's pumped storage power, transmission and Bhutan hydroelectric power pipeline, which could contribute to cash flows by FY29-30E.
The Khorlochhu hydroelectric power project (HEP) being developed through a 60:40 joint venture between Tata Power and Druk Green Power Corporation has achieved financial closure. Nuvama values Tata Power's committed equity in the project at ₹830 crore, adding around ₹4 per share to its valuation. Additionally, rising electricity demand in India presents significant growth opportunities, with India's power demand growing by approximately 8.5% year-on-year during the June quarter. The company projects that capital expenditure in the country's transmission sector will amount to around ₹9.2 lakh crore between FY25 and FY32.
Nuvama has upgraded Tata Power to 'BUY' from 'HOLD' with a target price of ₹421, raising it from the previous ₹400 target while leaving earnings estimates unchanged. The brokerage believes the correction has reduced valuation risk while leaving medium-term growth opportunities underappreciated. According to SEBI-registered research analyst Amit Chatterjee, an investor could consider entering Tata Power around ₹380 level with a 3-4 month horizon. His technical outlook suggests a stop-loss of ₹280 and a potential target of ₹480-₹500, indicating significant upside potential from current levels. The stock currently trades at around 2.4 times price-to-book value (P/B) and 22 times FY28 estimated earnings per share (EPS) with FY28E EPS estimated at ₹16.6. Nuvama's Base Case target price is ₹400, while the Bear Case target is ₹363.
