Tata Power charges 4% post Q2 results; Should you buy, sell or hold?

Tata Power shares climbed 3.6 per cent on Thursday and registered an intraday high of Rs 442.6 per share on BSE. The counter saw buying after the company reported stable Q2 results. 

 

Around 11:55 AM, Tata Power shares were up 3.41 per cent at Rs 441.7 per share. In comparison, the BSE Sensex was down 0.51 per cent at 79,537.65. The market capitalisation of the company stood at Rs 1,41,042.29 crore. 

 

On Wednesday, post market hours, Tata Power reported a net profit attributable to the owners of the company at Rs 926.53 crore for the quarter ended September 2024 (Q2 FY25), 6 per cent up from Rs 875.53 crore a year ago.

 

Tata Power Renewable Energy estimated the impact of stamp duty related to a merger at Rs 140 crore during the quarter, which the company disclosed as an exceptional item.

 

The company’s board also approved an investment of Rs 5,666 crore for a 1,000 MW pumped storage hydro project in Bhivpuri.

 

For the quarter under review, Tata Power’s revenue from operations stood at Rs 15,697.67 crore as compared to Rs 15,738.03 crore a year ago, almost flat from a year ago. Sequentially, Tata Power’s net profit dipped 5 per cent, and revenue from operations declined 9 per cent.

 

Tata Power stated that consolidated earnings before interest, taxation, depreciation, and amortisation (Ebitda) during the quarter rose 23 per cent to Rs 3,808 crore, supported by ramped-up solar manufacturing, favourable regulatory developments in distribution, and operational efficiency across businesses.

 

In a separate announcement, the company stated it had filed an insurance claim of approximately Rs 221 crore for damages incurred during a fire incident at the Cable Vault and subsequently the Control Room of its Trombay Plant.

What should investors do?

JM Financial has maintained a 'Buy' call on Tata Power with a target price of Rs 501 per share on expectations that the company will report 2024-27 revenue and Ebitda Compound annual growth rate (CAGR) of 10 per cent and 15 per cent respectively. 

 

Conversely, Kotak Institutional Equities has continued with a 'Sell' call on the stock with a revised target of Rs 315 from Rs 300 earlier.

 

"Valuations are rich at 25X P/E and 3.2X P/B on FY2026," the brokerage said. 

 

In the past one year, Tata Power shares have gained 78.4 per cent against Sensex's rise of 25 per cent.