Tata Power Plummets On Q4 Earnings; Kotak, CLSA Maintain Sell Call
CLSA and Kotak maintain a sell call on Tata Power stock with the target price of Rs 297 and Rs 265 respectively
Tata Power stocks plummeted around 4 per cent in the Thursday trading session after the power major declared its fourth quarter earnings for FY 2023-24.
Tata Power stock traded at Rs 418 with 3.7 per cent in the afternoon session on the National Stock Exchange (NSE).
Power major clocked 11 per cent growth in net profit at Rs 1,045.59 crore on year-on-year (YoY) basis driven by robust performance of its thermal coal generation business.
Notably, the firm’s thermal generation (including coal) cluster witnessed a whopping 58 per cent YoY fall in profit after tax (PAT).
Kotak institutional equities stated that as of this fiscal year, Tata Power's earnings were dependent on the sustainability of Sec 11 orders for the Mundra ultra mega power plan, which has been extended until October 2024, the growth of the renewable energy sector, and the stability of import coal prices and their contribution to earnings.
The demand for power in India is still rising, with an annual growth of 8 per cent in FY 2023-24 being recorded. The management of Tata Power expected this trend to endure for the next two to three years, at the very least. In the past six to eight months, coal prices have been steady and are likely to remain stagnant.
This fuelled pessimism in both CLSA and Kotak, who have a sell recommendation on Tata Power stock with the target price of Rs 297 and Rs 265 respectively.
According to CLSA, the low profitability in the field of renewable energy was the main cause of the bad Q4. The brokerage noted that because a sizeable portion of the company's profits were bolstered by dividends of Rs 700 crore from ITPC, the quality of the results still presents challenges.
