Goldman maintains buy on Tata Power ahead of CERC ruling

Says share price does not reflect a favourable outcome for the company in the final hearing on the tariff revision plea for the Mundra project

Goldman Sachs has maintained its buy rating on Tata Power on the grounds the share price does not reflect a favourable outcome for the company in the final hearing on the tariff revision plea for the Mundra project.

Tata Power had approached Central Electricity Regulatory Commission (CERC) seeking higher tariff for power generated from the Mundra plant due to expensive imported coal.

“We believe the outcome of the CERC hearing is key for stock rerating and have assumed a benefit of Rs 0.2/kwh in our valuations and earnings estimates,” said Durga Dath and Indrajit Agarwal, analysts at Goldman in a client note released Tuesday

The investment bank has maintained its 12-month price target for the stock at Rs 121 per share. It said the company’s third quarter earnings were better than expected.

“The hearings at CERC are in progress. The release of recent hearing minutes will provide more clarity on the direction of the case. Currently, realisation is about Rs 2.45/kwh and under-recovery is about Rs 0.50/kwh,” Goldman said.