Buy Tata Power, target price Rs 509: Motilal Oswal Financial Services

Motilal Oswal Financial Services has a buy call on Tata Power Company with a target price of Rs 509. The current market price of Tata Power is Rs 444.8. Tata Power, incorporated in 1919, is a mid cap company with a market cap of Rs 142336.40 crore, operating in the power sector.

Tata Power's key products/revenue segments include Power Supply, Project Management Fees, Other Operating Revenue, Power Distribution Net Work, Income from Finance Leases and Fly Ash for the year ending 31-Mar-2024.

Financials

For the quarter ended 30-09-2024, the company has reported a Consolidated Total Income of Rs 16210.80 Crore, down -7.58 % from last quarter Total Income of Rs 17540.98 Crore and up 1.13 % from last year same quarter Total Income of Rs 16029.54 Crore. Company has reported net profit after tax of Rs 858.00 Crore in latest quarter.

Investment Rationale
According to Motilal Oswal Financial Services, the valuation of TPWR is segmented across various business units, leading to a target price of Rs 509/share. The regulated business is valued using a 3x multiple on regulated equity. The coal segment is valued based on equity with a 1.5x multiple of FY24 book value. The renewables segment is valued at a 14x multiple of the projected FY27 EBITDA. The pumped storage segment is valued at 1x PB while the other segments are valued at 1.5x PB. Cash and investments add Rs 57/share. The sum of these contributions results in a total target price of Rs 509/share, reflecting the comprehensive valuation of TPWR?s diverse business segments.

Promoter/FII Holdings
Promoters held 46.86 per cent stake in the company as of 30-Sep-2024, while FIIs owned 9.15 per cent, DIIs 16.54 per cent.