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Buy This Tata Group Multibagger Stock For A Target Price of Rs 282
Tata Power Company Ltd is a mid cap auto company with a market capitalization of Rs 81,273.46 crore. Tata Power stock has risen 183.28 percent in a year, 93.07 percent in the last six months, and 10.94 percent in the last month. The stock has returned 14.12 percent to shareholders in the year-to-date (YTD) span. This multibagger stock has been issued a buy call by brokerage company Edelweiss Financial Services Ltd, with a target price of Rs 282. The brokerage estimates an 11 percent upside for the stock from its current market price of Rs 254 as of 4 February, 3:30 pm IST.
Key investment rationale for Tata Power Company Ltd (TPCL) according to Edelweiss
- TPCL business models are decoupled- minimal demand/volume risks as more than 80% of the PAT is attributable to the core regulated business. Thus core earnings are resilient enough even during demand decline.
- Management's plan to prune D/E from ~2.3x to 1.4.x instills confidence. Advanced divestment pipeline is INR40-55bn (Equity) is likely to gain momentum over the next 6-12M which could reduce the D/E to less than 1.4x.
- We perceive a couple of potential triggers (like Mundra resolution, renewable InvIT, CESU acquisition etc.) in the stock which could play out over the next 12-15 months.
- TPCL's strategic intent-business restructuring and deleveraging-has started to crystallise and it will go a long way in enhancing investor confidence, in our view.
- The narrative is gradually shifting from a deleveraging/value proposition company to growth-oriented company as Management has set an ambitious FY25 target to double revenue to ~INR600bn, triple profit to INR36bn and 550bps accretion in RoE to 12% plus.
The brokerage’s take on Tata Power Company
The brokerage has said that "Tata Power has signed a Distribution Franchisee Agreement (DFA) with Ajmer Vidyut Vitran Nigam Limited (AVVNL) to cater to the power requirements of customers in Ajmer for a period of 20 years. Its international presence includes strategic investments in Indonesia through a 30% stake in the leading coal company PT Kaltim Prima Coal (KPC) to securitise coal supply and the shipping of coal for its thermal power generation operations and in Bhutan through a hydro project in partnership with The Royal Government of Bhutan. The company also has a 26% stake in an SPV 'Resurgent' that has acquired 1980MW Prayagraj Power plant."
The brokerage also believes that the stock's significant risks include the swing in international coal prices and high debt levels, which investors should be careful of.
Disclaimer
The stock has been picked from the brokerage report of Edelweiss Financial Services Ltd. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
