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Tata Power Company Ltd's shares experienced a significant surge of over 4 percent following the release of its Q2FY25 results, with multiple brokerages reaffirming their 'Buy' ratings. This positive sentiment stems from the company's robust financial performance and promising outlook for future growth. Elara Securities, in particular, raised its target price on the stock to Rs 518 from Rs 463, upgrading its rating to 'Buy' from 'Accumulate.' They highlighted Tata Power's strategic positioning to capitalize on the growing demand for power transmission, distribution reforms, and green investments.
Other prominent brokerages, including Motilal Oswal Financial Services, JM Financial, and Nomura, also maintained their 'Buy' ratings, echoing the optimism surrounding Tata Power's prospects. This widespread support from the financial community reinforces the confidence in the company's ability to deliver sustainable growth and value creation for its stakeholders.
Morgan Stanley also expressed a positive outlook, maintaining an 'Overweight' rating on Tata Power and setting a higher target price of Rs 577. This optimistic stance reflects the firm's belief in the company's strong fundamentals and potential for further appreciation in its share price.
While the majority of analysts maintained their 'Buy' ratings, there were some dissenting voices. Nuvama, for instance, expressed a more cautious stance, citing high valuations as a concern. They retained their 'Reduce' rating on the stock, suggesting a potential for price correction in the near term. Similarly, Jefferies maintained an 'Underperform' rating on Tata Power with a lower target price of Rs 340, reflecting their less bullish view on the company's prospects.
Despite the cautious notes, Tata Power's overall performance in Q2FY25 solidified its positive trajectory. The company reported a 6 percent year-on-year increase in consolidated net profit, reaching Rs 926.5 crore. While revenue remained flat at Rs 15,697.7 crore, primarily due to lower generation revenue during the monsoon season, this marked the company's 20th consecutive quarter of profit after tax (PAT) growth, demonstrating its consistent profitability.
Furthermore, Tata Power's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) saw a notable increase of 23 percent YoY, reaching Rs 3,808 crore. This growth underscores the company's strong operational efficiency and its ability to generate solid cash flows.
In terms of its expansion strategy, Tata Power has surpassed 15 GW of installed generation capacity, encompassing both conventional and renewable sources. Its clean energy portfolio now exceeds 12.9 GW, with 6.4 GW operational and 6.5 GW under construction. This commitment to renewable energy positions the company as a leader in the transition towards a sustainable energy future.
Capital expenditure in Q2FY25 amounted to approximately Rs 5,200 crore, bringing the total for the first half of FY25 to Rs 9,100 crore. This investment reflects the company's ongoing commitment to building out its infrastructure and enhancing its capabilities. Against a full-year plan of around Rs 20,000 crore, Tata Power is actively executing its growth strategy.
While revenue from Generation and Renewables experienced declines of 13 percent and 11 percent year-on-year, respectively, falling to Rs 4,309 crore and Rs 1,913.5 crore, the Transmission and Distribution segment registered an 8 percent increase in revenue, reaching Rs 10,207 crore. This growth was attributed to reduced distribution losses in Odisha, demonstrating the effectiveness of the company's efforts to improve efficiency in this segment.
In conclusion, Tata Power's Q2FY25 results showcased its strong financial performance, strategic investments in clean energy, and a positive outlook for future growth. The overwhelming support from brokerages, with the majority maintaining 'Buy' ratings, highlights the market's confidence in the company's ability to deliver value to its shareholders. While some analysts expressed caution due to valuations, the overall sentiment remains optimistic, suggesting that Tata Power is well-positioned to continue its upward trajectory in the coming quarters.
Source: Tata Power shares rise 4% as brokerages uphold 'Buy' ratings post Q2 results