Indian power generation major, Tata Power has had a quiet few months at the bourses.
The Tata Power share price has moderated by around 6% in the past six months.
But, analysts at brokerage firm Sharekhan remain bullish on the Tata Group company.
Tata Power share price prediction
Analysts at the brokerage firm maintained their “buy” rating on the stock with a target price of ₹540 (£5.40).
If the Tata Power share price prediction, it would reflect an around 30% upside from the stock’s current market price of ₹413.
On a year-to-date basis, the Tata Power share price has gone up around 25%.
Reasons behind Tata Power share price prediction
The brokerage’s outlook is based on the company’s focus on expanding its renewable energy and transmission businesses, which are expected to drive sustained earnings growth in the coming years.
During an analyst meeting held earlier this week, Tata Power outlined its growth roadmap for FY30, with an increase in capital expenditure (capex) guidance. The company has raised its annual capex target to ₹25,000 crore (£2.3 billion), up from ₹22,000 crore previously.
Over the next few years, Tata Power plans to invest ₹1.46 lakh crore, with 60% of this allocation directed towards renewable energy initiatives.
The company’s renewable capacity is expected to more than double, rising from 16.7GW currently to 33GW by FY30.
Operational renewable capacity is also set to increase from 6.7GW to 23GW during this period, further cementing Tata Power’s position in the growing green energy space.
Key highlights from Tata Power’s plan include:
- Renewable Energy Expansion: The company targets a renewable energy capacity of 23GW by FY30, up from the current 6.7GW. This will raise the share of renewable energy capacity in the company’s overall capacity to 65%.
- Rooftop Solar: Tata Power is also poised to benefit from the rapid growth in India’s rooftop solar market, which is expected to grow at a 36% compound annual growth rate (CAGR) between FY24 and FY30.
- Transmission Growth: The company aims to expand its transmission network, with a projected growth in transmission capacity from 4,633 circuit kilometers (Ckm) to 10,500 Ckm by FY30. This will require a capex of ₹24,850 crore.
- Distribution Business and Customer Base: In distribution, Tata Power plans to increase its customer base from 12.5 million to 40 million by FY30, further enhancing its reach.
- International Expansion: The company has signed a memorandum of understanding (MoU) with Druk Green Power in Bhutan for clean energy projects, contributing to its international growth strategy.
Tata Power earnings projections
Sharekhan’s confidence in Tata Power’s future growth is reflected in its earnings projections.
The brokerage expects the company’s EBITDA and PAT to rise by 2.4x and 2.5x, respectively, by FY30 compared to FY24 levels.
Revenue is anticipated to grow by 1.6x, reaching ₹1 lakh crore by FY30.
The focus on renewable energy and transmission is expected to significantly contribute to the company’s long-term growth, with the share of renewables in Tata Power’s PAT projected to increase to 50% by FY30, up from 21% currently.
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