Tata Power Q2 Results Review - Focus On Execution Now: Motilal Oswal

Motilal Oswal Report

Tata Power Company Ltd.'s Q2 FY25 Ebitda came in 15% above our estimate of Rs 32.6 billion despite challenges at Mundra (low plant availability) and Odisha discom operations (impacted by cyclone/heavy rains). However, the adjusted PAT was just a 2% miss versus our estimate.

Key highlights for the quarter included:

1. module manufacturing is now operating at near 100% utilization while cell operations have commenced,

2. the company is looking to execute a bulk of the EPC order book in H2 FY25,

3. while RE generation commissioning has been slow till now, management expects this to pick-up pace as cell/module manufacturing ramps up operations, and

4. the board approved the investment proposal for 1GW pumped storage project.

Following the weak Q2 FY25 result at the reported PAT level, we cut our FY25 estimate by 13%, mainly as we build in the Rs 4.4 billion merger-related charges and given the weaker profitability at some of the Orissa subsidiaries.

We also moderate our FY26 adjusted PAT by 5% as RE generation ramp-up has been somewhat behind expectations.

We reiterate our Buy rating on the stock with a target price of Rs 509.

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