Tata Power Q2 earnings fail to impress, analysts keep ‘sell’ calls; coal price risk to EPS

Morgan Stanley has maintained underweight call on the stock with a target Rs 207 per share.

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Tata Power Company stock shed more than 2 percent on November 9, as the company’s fiscal second quarter results failed to impress investors, with analysts maintaining bearish calls on the stock. On November 8, Tata Power said its Q2 FY24 consolidated net profit grew 8.8% on-year to Rs 1,017 crore. Consolidated revenue for the quarter rose 9 percent on-year to Rs 15,442 crore. EBITDA jumped 51 percent to Rs 3,087 crore in July-September.

At 09:18 hrs The Tata Power Company was quoting at Rs 248.60, down Rs 6.30, or 2.47 percent on the BSE.

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CLSA kept its ‘sell’ call on Tata Power stock with a target of Rs 205 per share. According to the research firm, the collapse in Indo coal profits drove a 4 percent on-year fall in the company’s profit before tax, while Q2 profit after tax improved on lower deferred taxes.

Further, Tata Power’s renewables IPP business has been hit by high rates, even as its EPC margin remains volatile. The Odisha discoms & expansion into pump storage remain the key for long-term positives, while weak coal prices are a key negative catalyst leading to risk to its EPS, CLSA said.

Goldman Sachs too has kept its ‘sell’ rating on Tata Power stock with a target of Rs 215 per share. It said that the imposition of section 11 of the electricity act until June 2024 should support earnings, despite the impact of coal price decline in H2. Goldman has raised FY24, FY25, FY26 EPS estimate by 16 percent; 14 percent; and 15 percent, respectively.

Morgan Stanley has maintained its ‘underweight’ rating on Tata Power stock with a target Rs 207 per share, despite an improvement in the core business reflecting better performance in Odisha discoms. Morgan Stanley sees improving wind PLF & execution, and improved margin in the solar EPC business.

Tata Power’s net debt decreased marginally in 2Q. The company’s clean energy portfolio achieved the milestone of 5,500 MW during Q2 FY24, standing at 38 percent of total installed generation capacity.

On November 8, Tata Power stock ended at Rs 255.20, up 012 percent on the BSE.