Tata Power shares trading in consolidation mode, can they deliver in 2025?

Shares of Tata Power have seen consolidation in a narrow range in the last six months. The Tata Group stock, which closed at Rs 447.90 on June 10 this year ended at Rs 435.20 in the previous session. During the consolidation phase, the stock also hit its record high of Rs 494.85 on September 27, 2024. With the Tata Group stock managing to deliver just single digit- returns in period up to six months, investors are wondering will the stock break out of its consolidation range and boost returns for stakeholders in 2025.

Brokerage Motilal Oswal has reiterated its Buy rating on the stock with an SoTP-based price target of Rs 509.

"Tata Power targets 23 GW of operational green generation capacity by FY30, with 65% of total capacity operational by FY30 comprising renewable energy. A phased commissioning of 5.6 GW of projects is planned between 4QFY25 and 2QFY27, with significant progress in land acquisition (40%), PPA signings (90%), and transmission connectivity (80%)," said Motilal Oswal.

ICICI Securities has reiterated its buy call with a price target of Rs 541.

Tata Power hosted its Investor Day at its 4.3GW solar cell and module factory in Tirunelveli, Tamil Nadu on 6 Dec,’24.

ICICI Securities in its report talked about the following developments from the company’s end.

Upping the capex target

The capex target has been revised upwards. The new capital expenditure estimate is INR 1.5trn till FY30 (vs earlier target of INR 0.6trn till FY27). Out of which, 60% will go towards renewables, 10% towards pumped storage.

Target of 2.5 times profit by FY30.

It stated revenue target of Rs 1 lakh crore by FY30 (vs earlier target of Rs 1 lakh crore by FY27; Rs 615 bn in FY24), EBITDA target of Rs 300 bn (vs earlier target of Rs 200 bn by FY27; Rs 127 bn in FY24) and profit (profit after tax before minority) target of Rs 100 bn (vs earlier target of Rs 76 bn by FY27; Rs 41 bn in FY24). Revenue target is not meaningful given the fact that >70% of current revenue comes from regulated businesses (fuel cost is pass through).

JM Financial has a 'Buy' rating on Tata Power with a target price of Rs 501.

The brokerage noted that the captive power requirement within the Tata Group is at least 10GW. The company is focusing more on RE-RTC projects with equity IRR returns of 17-18 per cent. The government is expected to soon make an announcement on nuclear power. The company is in talks to set up a small modular reactor, JM Financial said.