Tata's Power Stock Recommended As Buy, Hits New 1-Year High; Wins Bid For Rs 1,544 Crore Transmission Project

Tata Group-backed flagship leading integrated power company, Tata Power has touched a new 52-week high on December 1st. The stock price will be in focus next week after it won bids for the Bikaner-Neemrana Transmission Project to boost Renewable Energy evacuation in India. The project's estimated cost is Rs 1,544 crore. Traders can still buy Tata Power stock as a nearly 12% potential upside is seen in the near term. The stock is currently near Rs 275.

On BSE, the stock ended at Rs 275.75 apiece with market cap of Rs 88,111.49 crore. On Friday, the stock touched a new 52-week high of Rs 278.50 apiece during trading hours. Year-to-date, the stock has now gained by over 30%, giving better returns than the benchmark Sensex and Nifty.

As per the regulatory filing, Tata Power won the bid to acquire Bikaner-III Neemrana-II Transmission, a project special purpose vehicle (SPV) set up by PFC Consulting, a subsidiary of Power Finance Corporation.

The transmission project will be developed on a Build-Own-Operate-Transfer (BOOT) basis, and will enable the evacuation of 7.7 GW of renewable energy from the Bikaner Complex in Rajasthan. The project entails the establishment of a ~340 km transmission corridor from the Bikaner-III pooling station to the Neemrana II substation.

Notably, Tata Power will maintain the transmission project for 35 years. The project is estimated to cost Rs 1,544 crore and is expected to be commissioned within 24 months from the date of transfer of the project SPV.

Upon successful commissioning, the project will become a vital link in the roadmap unveiled by the Ministry of Power in 2022 for integrating over 500 GW of renewable energy capacity into the national grid by 2030.

Tata Power is a leading integrated power company and a part of Tata Group, India's largest multi-national business conglomerate. The company has a diversified portfolio of 14407 MW, spanning the entire power value chain - from renewable and conventional energy generation to transmission & distribution, trading, storage solutions and solar cells and module manufacturing.

This week, in its research note, B&K Securities said, "We continue to maintain our Buy rating on the stock, as energy transition towards more clean and green energy is the key growth driver for the company with improving visibility on Mundra. With improving T&D business through Odisha discoms (and further additions expected), TPWR's Renewables and growing order book of EPC business are likely to drive valuations."

In addition to this successful commencement of Pumped Storage can ensure pure renewable play and can secure long-term growth for the company, the brokerage highlighted.

Further, while raising its target price, the brokerage's note said, "The stock has gone up 28% YTD and is now trading at 2.1x FY26E P/B. With visibility in renewables improving and margin improvements likely in EPC business from cell/module plant, and PLF of Mundra increasing with continuation of Section 11 till June 2024 (likely to get extended beyond that) we have revised our estimates a bit, rolled our valuation matrix to FY26 and upgrade SOTP-based target price to Rs 308 (earlier Rs 277)."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would 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.