Buy This Tata Stock That Can Grow Up To 24.27%, Says Anand Rathi

Stock-broking firm Anand Rathi has suggested investors to buy the shares of Tata Power Company Ltd, for it believes the price will rise significantly by up to 24.27%. The brokerage house also given a target price that the stock will scale up to from current levels. This mid-cap company from the Tata group primarily operates in the power sector and was incorporated in 1919.

The company has been reducing its debt for the last few quarters. Recently, when it posted its fourth-quarter results, there was a further reduction in its debt and strong performance across all businesses was reported, largely led by renewables.

Fourth Quarter Performance

Tata Power's consolidated revenue was up by 4.13% at Rs 124,538 million in Q4 FY23 vs Rs 119,600 million in Q4 FY22 due to higher sales across Distribution Companies & capacity addition in renewables. While for the full year, the consolidated revenue growth of 32% at Rs 5,60,330 million was seen against Rs 4,25,760 million in FY22 due to higher availability in Mundra Thermal Plant which operated under Ministry of Power (MoP) guidelines, higher sales across distribution companies & robust addition in renewables portfolio.

The EBITDA was up by 38% at Rs 31,010 million vs Rs 22,530 million in Q4FY22 due to lower under-recovery in Mundra, capacity addition in renewables & execution of Solar EPC projects. Moreover, the consolidated reported profit after tax jumped up by 48% at Rs 9,390 million vs Rs 6,320 million in Q4FY22 supported by strong performance across all businesses.

Debt & Capex

Tata Power posted a further net debt reduction of Rs 28,000 million in the March quarter and it currently stands at Rs 3,53,280 million. This is because of very healthy operating performance, equity infusion by our strategic partner and working capital release.

Additionally, the company's capital expenditure (capex) for renewables came in at close to Rs 2,500 crore out of a total consolidated capex of Rs 6,500 crore. The pipeline for renewables includes 2.6GW and the order book is Rs 17,000 crore, indicating a higher capex for FY'24.

View & Rating

As per the brokerage research note of Anand Rathi, Tata Power continues to steadily move towards its long-term aspiration built on businesses of the future while maintaining a healthy balance sheet. This is visible from the improvement seen in the operational and financial metrics in each passing quarter. With rapidly growing generation capacity at its disposal, strengthened focus on EV and renewables businesses.

"We expect the company's performance to improve from current levels. We maintain our rating on the stock to BUY with a target price of Rs 256," the broking firm added.

Dividend Details

Further, the company has a good track record of giving dividends over the years. In a recent board of directors meeting held on May 4, 2023, Tata Power recommended a dividend of Rs 2 per equity share of Rs 1 each (@ 200%) to the shareholders for the year ended 31st March 2023.

The dividend recommended by the board is subject to the approval of the shareholders at the ensuing annual general meeting (AGM) of the company scheduled to be held on Monday, 19th June 2023.

Also, the company announced that the Register of Members and Share Transfer Books of the company will remain closed from Thursday, 8th June 2023 to Wednesday, 14th June 2023 (both days inclusive) for taking record of the Members of the company for payment of dividend.

Share Price Movement

The latest market price of Tata Power Company stock is Rs 210.10, it has grown by 1.35% on an intraday basis. In the last one year, the share price has declined by 5.1% but over three years it has increased rapidly by 488.52%.

Disclaimer

The stock has been picked up from the brokerage report of Anand Rathi. Greynium Information Technologies, the author or the brokerage firm will not be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.