Tata Power gains 9% after strong Q1 performance

MUMBAI: Shares of Tata Power jumped 8.8% after the company reported a 10.3% year-on-year rise in its June quarter consolidated net profit to ₹268.10 crore.

At 1225 pm, the stock traded at ₹57.05 apiece, up 7.7% from previous close while the benchmark Sensex was down 0.3% at 38239.01.

Net sales of the company fell 16.9% to ₹6,452.99 crore in Q1FY21 from ₹7,766.72 crore in the year-ago period.

Revenues fell primarily due to lower demand, delay in solar EPC businesses on account of covid-19 and lower coal prices. The company reported strong cash generation due to robust collection and tighter control over working capital.

Analysts at Motilal Oswal, in a result note said, "Net debt declined to ₹44,400 crore...Debt reduction leads to lower interest costs, and with normalization in its engineering, procurement, construction (EPC) businesses and some working capital, we expect EPS to increase at a 9–10% CAGR over FY2020–2023. The approval of a tariff hike at Mundra, merger of Coastal Gujarat Power Ltd (CGPL) & Tata Power Solar with Tata Power are favorable InvIT valuations provide upsides."

The brokerage have upgraded the stock to Buy.

During the quarter, Tata Power won new renewables bids totaling 220 MW, while the company's solar EPC order book stands at ₹8,700 crore.

"Revision in value primarily from a higher value for the noncore investments, as well as higher valuation for Tata Power Solar and Tata Power Renewable on the back of new project wins. Resolution of under-recovery on Mundra ultra mega power projects, potential investment in renewable InVit and continued de-leveraging of the balance sheet through sale of non-core assets are key near-term triggers" said analysts at Kotak Institutional Equities. The brokerage has a buy rating on the stock.