The share price of Tata Power fell over 3% in early trade on Thursday as the business published profits for the fiscal quarter ending September 2023. On the BSE, Tata Power shares plummeted as high as 2.96% to 247.35.
Tata Power Company increased its overall net profit by 8.79% year on year (y-o-y) to 1,017.41 crore in the July-September quarter. The company’s revenue increased 9% year on year to 15,442 crore in Q2FY24.
EBITDA climbed 75.5% year on year to 3,090.4 crore from 1,760.5 crore, while EBITDA margin improved to 19.6% from 12.5%.
However, Tata Power’s second-quarter earnings failed to excite analysts, who maintained their gloomy outlook on the stock.
According to Kotak Institutional Equities, Tata Power’s Q2FY24 profit of $8.7 billion benefited from improved Mundra plant utilization under Sec 11 pricing, however, coal profit difficulties continued to impact on profitability.
“The extension of Sec 11 tariffs up to June 2024 as well as the bottoming of the prices of imported coal are expected to decrease near-term earnings volatility, with slight expansion hinging on profitable contribution from the renewable business,” the investment bank stated.
It kept its ‘Sell’ rating on Tata Power shares and raised its target price to $220 per share from $200 previously, citing the extension of the Sec 11 order for Mundra, increased capacity for renewable assets, and consistent profitability from coal mines.
The stock is rated ‘Hold’ by JM Financial, with a target price of 230 per share. With solid revenue flows from its regulated generating and distribution operations, the firm thinks it can focus on expanding its renewable energy (RE) portfolio and negotiating a cost-effective long-term PPA for the Mundra facility.
According to Antique Stock Broking, Tata Power’s previous capital allocation was driven by 39% in coal/CGPL, 32% in regulated business, and 29% in renewables. The future road will include 49% regulated business and 32% renewables.
The brokerage’s ‘Buy’ call on the company was maintained, with a target price of 275 per share. Key risks, it argues, are a severe drop in coal prices affecting subs, a slower resolution on CGPL, and a systemic slowdown in the RE space.
CLSA, a foreign brokerage firm, reaffirmed its ‘Sell’ rating on Tata Power, with a target price of 205 per share.
Tata Power shares were trading 2.14% down on the BSE at 249.45 a share at 10:10 a.m.