Tata Power Stock Research Report

Turning new ‘manufacturing’ leaf…..

Tata Power hosted its Investor Day at its 4.3GW solar cell and module factory in Tirunelveli, Tamil Nadu on 6 Dec,’24. The company laid out its five-year strategy that includes: a) capital expenditure of INR 1.5trn, b) upping the target for green capacity to 23GW (from 20GW earlier) and under construction capacity of 10GW, c) revenue target of INR 1trn and d) profit target of 2x or INR 100bn – all targets for FY30. The target for renewables capacity is 15GW by FY27 – comprising 5.4GW of existing renewables and contracted capacity of 4.5GW. The key drivers of near-term growth, value and earnings in our opinion are: i) new tied up RE capacity, ii) solar manufacturing cell and module iii) solar rooftop. Reiterate BUY with SoTP-based TP of INR 541 as we roll forward our targets to FY27E.

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 2.5x profit by FY30

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

Target of clean and green capacity

Total target of clean capacity is 15GW by FY27. Tata Power Renewable Energy (Tata Power has 89% stake) has total portfolio of 10GW. – 5.4GW operational and under construction capacity stands at 4.5GW. It is also doubling down on hydro and pumped storage investments.

Target for solar manufacturing and solar rooftop

We visited the 4.3GW solar cell manufacturing facility. The capacity has been ramped up to 4.3GW. Tata Power expects module production of 3.3GW/4GW and cell production of 1GW/4GW, in FY25/26, respectively. It expects solar rooftop revenue to grow at 36% CAGR to INR 110bn (vs INR 17bn in FY24) by FY30.