Tata Power shares soar to 52-Week high as JM Financial Upgrades Rating to ‘Buy’; Check the brokerage call Shares of Tata Power soared 9.55% to hit a fresh 52-week high of Rs 322.25 on Thursday, reaching a record high after brokerage firm JM Financial upgraded their rating for the scrip to ‘Buy,’ from ‘Hold’ setting a 24% upside target price of Rs 350. “Tata Power’s recalibrated strategy involves tapping high-margin group captive RE (renewables) opportunities, exiting low-value businesses, venturing into brownfield pumped hydro storage, and expanding the transmission business beyond distribution,” said the brokerage report. The report further pointed out that, the company has recalibrated its strategy, emphasising higher-margin group captive opportunities and redirecting focus from low-value solar-powered irrigation pumps to more lucrative prospects. This shift is reflected in the recent 966MW RE-RTC project order from Tata Steel, exemplifying the company’s new strategic direction. The brokerage firm forecasted Tata Power’s compound annual growth rate (CAGR) for Revenue, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), and Profit After Tax (PAT) at 15%, 23%, and 32% respectively from the fiscal year 2023 to 2026. This optimistic forecast is underpinned by a growing asset base and a more favorable margin profile, suggesting an expectation of sustained financial growth and improved operational efficiency over the specified period. We upgrade the stock’s rating to ‘Buy’, setting an SOTP-based target price of Rs 350, indicating a potential upside of 24% from current levels,” said the brokerage report, “ added the brokerage report. The report further added that the reclibrated strategy coupled with the visible resolution of the Mundra issue, positions the company for accelerated growth in the future and said that, “Considering the escalating power deficit (peak 4.0%/1.4% during YTDFY23/TYDFY24), the recurrent enforcement of Section-11 of the Electricity Act, 2003, stable Indonesian coal prices, and the competitive generation cost (Rs 4.68/kWh from Tata Mundra in contrast to Rs 5.8-5.77/kWh from Adani Power’s Mundra), we forecast state discoms (distribution companies) to finalise long-term power purchase agreements (PPAs) before Jun’24 (when the latest extension to Section-11 will expire),” said the brokerage report. Tata Power has also entered into pumped-hydro storage and is developing 2 brownfield PSP projects (1GW Bhivpuri, 1.8GW Shirawta) with a combined capex of Rs 4700 crore/ 7850 crore, targeting minimum earnings of Rs 0.9 crore/MW/year from FY28 onward through accelerated execution and improved returns. This would offer an advantage of compressed execution time and better returns, said the brokerage report.
Logistics, good or bad, are driven by the states and the commerce ministry has a LEADS (Logistics Ease Across Different States) report, based on perceptions. The 2023 version was released in December. Since states are heterogenous, in the reporting, they are divided into four groups—coastal, landlocked, north-east, and UTs. States that do well are called achievers. Nomenclature matters. Thus, states that are middling aren’t called average. They are called fast movers. States that are sub-par are called aspirers. Let me highlight coastal states, since 75% of export cargo is estimated to originate from them. Among coastal states, ones that do well are Andhra Pradesh, Gujarat, Karnataka, and Tamil Nadu. The ones that lag are Goa, Odisha, and West Bengal. While India’s logistics performance may have improved over time, that’s not true of every state. Some have slipped. Most states have a state-level logistics policy, including Goa and Odisha. West Bengal, bottom of the pecking order in the coastal category, doesn’t have one. To quote from LEADS 2023, “Looking ahead, the State (West Bengal) could benefit from formulating a State Logistics Master Plan and State Logistics Policy to drive efficiency improvements and facilitate investments within the logistics sector and undertake consultation with the logistics stakeholders for educating and informing them about the initiatives State is undertaking for the development and improvement of logistics sector.”
Logistics has been talked about for a long time and India has also focused on improving performance. We are now getting some precise data on measurement and quantification. That helps.
Bibek Debroy, chairman, EAC-PM. Views are personal.