Tata Power Share Price Rises As Motilal Oswal Initiates Coverage with 'Buy' Rating

Tata Power share price rose nearly 3% on Tuesday after Motilal Oswal initiated coverage on the company, naming it a top pick in the Indian power sector. The brokerage set a target price of Rs 530, with a 'buy' rating that reflects a potential upside of 19%.

The brokerage highlighted Tata Power's diversified operations and scalability as key growth drivers. The company is undergoing a multi-year business transformation, with plans to allocate 45% of its capital expenditure from fiscal 2023 to fiscal 2027 to renewable energy projects. 

This strategic shift is expected to increase the share of core earnings from 40% to 90% over the same period, according to the note.

In their report, Motilal Oswal also discussed broader trends in the Indian power sector, estimating an investment opportunity of Rs 40 lakh crore over the next decade. This potential includes Rs 34 lakh crore in firm capital expenditure and Rs 8 lakh crore in optionality, with generation, transmission, and smart metering accounting for 86%, 10%, and 4% of this investment, respectively.

Additionally, the brokerage expressed a preference for renewable energy generation over thermal generation, citing limited private sector participation in thermal projects as a risk for execution delays. 

Motilal Oswal also initiated coverage on Power Grid Corp., JSW Energy Ltd., NTPC Ltd., and Indian Energy Exchange Ltd. underlining the growing investment landscape in the Indian power sector.

Tata Power stock rose as much as 2.87% during the day to Rs 467.50 apiece on the NSE. It was trading 2.32% higher at Rs 465 apiece, compared to an 0.04% decline in the benchmark Nifty 50 as of 11:21 a.m. 

It has risen 80.42% in the last 12 months and 40.06% on a year-to-date basis. The total traded volume so far in the day stood at 3 times its 30-day average. The relative strength index was at 68.90.

Thirteen out of the 23 analysts tracking Tata Power have a 'buy' rating on the stock, one recommends a 'hold' and nine suggest a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential downside of 11.5%.