Tata Power, JSW Energy Get 'Buy' As Nomura Initiates Coverage; Sees Over 27% Upside
Nomura has set a target price of Rs 560 for Tata Power, implying an upside of nearly 27%. While for JSW Energy, the target price is set at Rs 885 apiece, implying an upside of 31%.
Nomura has initiated coverage for Tata Power Co. and JSW Energy Ltd. with a "buy" rating while sounding bullish about India's renewable energy sector.
The brokerage, in a note dated Oct. 7, said it has set a target price of Rs 560 for Tata Power, implying an upside of nearly 27% from the previous close. While for JSW Energy, the target price is set at Rs 885 apiece, implying an upside of 31% from the previous close.
Nomura said it expects Tata Power's Ebitda to grow at a compounded annual growth rate of 16% between the financial years 2023–24 and 2026–27. It also expects Tata Power to double its renewable energy capacity to 10 gigawatt by fiscal 2027.
The company is likely to "deliver robustly on its EPC business", with a growing order book that is currently at Rs 15,700 crore. It is also expected to log a sharp jump in profitability from the power distribution business in Odisha, according to Nomura.
For JSW Energy, the brokerage sees a "robust outlook with 38% Ebitda CAGR over fiscal 2024–2027, driven by the company doubling its RE generating capacity by fiscal 2027". The company is likely to achieve its 20-gigawatt target ahead of 2030, it said.
'Green Is The New Gold'
Nomura, while pointing towards India's ambitious target of setting up 500 gigawatts of renewable capacity by fiscal 2030, said "green is the new gold".
Thermal capacity will continue to provide support for grid stability and baseload requirements, while renewable energy capacity "will significantly outpace thermal capacity growth, largely led by solar", it said.
In fiscal 2024, 40 gigawtts of renewable energy capacity were allotted through auctions. To reach the 500-gigawatt target by fiscal 2030, the pace of renewable energy auctions will have to materially pick up to around 60 GW each year, Nomura said.
The brokerage added that renewable energy generation should drive incremental investments of around $200 billion to meet India’s targets.
On Tuesday, shares of Tata Power closed 3.54% higher at Rs 456.9 apiece on the NSE, whereas JSW Energy's stocks settled 7.17% higher at Rs 722.55. In comparison, the benchmark Nifty 50 advanced 0.88%.
Of the 24 analysts tracking Tata Power, 15 have a "buy" rating on the stock, one suggests a "hold", and eight recommend a "sell", according to Bloomberg data. The average of 12-month analysts' price target implies a potential downside of 4.3%.
Six among the 13 analysts tracking JSW Energy have a "buy" rating on the stock, four have a "hold" and three recommend a "sell", according to Bloomberg. The average of 12-month analysts' price target suggests a potential downside of 2.9%.
