The target price for Tata Power is set at ₹345, with the current market price standing at ₹354.65. In a previous report dated May 9, 2024, it was noted that Tata Power was a resilient organization, but the stock price surge was based on the assumption of successful execution of various projects and external factors beyond the company’s control. These factors included weaknesses in power demand, delays in signing power purchase agreements, slower progress in privatizing state-owned distribution companies, delays in construction of pumped storage projects, uncertainty regarding the monetization of Tata Sons stake, low coal prices, and lack of resolution on the Mundra issue.
Since then, Tata Power’s stock price has corrected by 31% from its 52-week high. The company has made progress on various projects, including solar module/cell manufacturing and the initiation of new programs like pumped storage and hybrid. As a result, there has been an increase in earnings per share estimates for FY25-26 by 9-13%, with the introduction of FY27 estimates. The valuation has been updated to reflect these developments, resulting in a new target price of ₹345 (up from ₹300) and a recommendation upgrade to Hold (from Reduce).
Potential upside risks include accelerated execution of renewables and pumped storage projects, as well as advancements in discom privatization. On the downside, sustained weakness in power demand and poor execution could pose risks to the company’s performance.
Published on February 24, 2025.
