Tata Power Share Price Target at Rs 470: ICICI Securities
ICICI Securities has reaffirmed its BUY rating on Tata Power, projecting a target price of Rs 470, indicating an 18% upside from its current market price. The brokerage cites robust performance across renewables, transmission, and solar manufacturing, along with improved operational efficiency, as key growth levers. Tata Power's Q4FY25 results demonstrate significant traction in its green energy ambitions, supported by a 27% YoY EBITDA growth and the commissioning of 4.3GW solar manufacturing capacity. As the company eyes more opportunities in nuclear and distribution privatization, the outlook remains compelling for investors seeking exposure to India's energy transition.
Strong Q4FY25 Performance Led by Renewables and Odisha Discoms
Tata Power reported Rs 173bn in revenue in Q4FY25, up 7% year-over-year, driven primarily by growth in renewables, solar manufacturing, and improved distribution operations in Odisha.
EBITDA surged to Rs 34.8bn, up 27% YoY, aided by the commissioning of new renewable energy assets and operational efficiencies. The EBITDA margin expanded by 320bps YoY to 20.1%.
Net profit stood at Rs 10.4bn**, up 16.5% YoY, underpinned by improved performance across segments.
Solar Manufacturing and EPC Businesses Show Strategic Synergies
Tata Power is aggressively ramping up its solar manufacturing capacity.
In FY25, the company produced 879MW of solar modules and 650MW of cells in Q4 alone, contributing to an estimated Rs 2bn in profit. Once fully ramped up, its 4.3GW capacity will support vertical integration across its EPC, rooftop, and utility-scale businesses.
In its solar EPC segment, Tata Power holds an order book of Rs 110bn, with Rs 70bn from captive projects and Rs 40bn from external clients.
Robust Capex Plans for FY26 Reinforce Growth Vision
Tata Power plans a capital expenditure of Rs 250bn for FY26, with a lion’s share—60% or Rs 150bn—earmarked for renewable energy. Transmission and distribution will account for another Rs 75bn.
These investments align with the company’s target of adding 2.5–2.7GW in renewable energy capacity during FY26, with an eye on 5.5GW over the next 24 months.
Transmission and Storage Projects to Fuel Long-Term Earnings
Tata Power is diversifying its portfolio with significant forays into transmission and storage:
4 transmission projects worth Rs 123bn are under construction, expected to deliver EBITDA of Rs 5.8bn by FY26.
The company is also working on large-scale pumped storage projects including the 1GW Bhivpuri PSP and 1.8GW Shirwata PSP.
In Bhutan, it has partnered with Druk Green Power for a 5.1GW clean energy initiative.
New Market Avenues: Distribution and Nuclear
The company’s distribution strategy is gaining ground, particularly after the successful turnaround of Odisha DISCOMs. It now plans to bid for the privatization of two UP distribution companies, leveraging its experience and operational excellence.
Tata Power is also exploring opportunities in the nuclear energy sector, signaling its intent to play a broader role in India’s future energy matrix.
Valuation Snapshot and SoTP-Based Price Target
ICICI Securities continues to assign a Sum-of-the-Parts (SoTP) valuation to Tata Power, reflecting its diversified business model.
| Business Segment | Method | Value (INR mn) | Stake | INR/Share |
|---|---|---|---|---|
| Mumbai License Area | 2.5x Reg. Equity | 147,680 | 100% | 46 |
| Delhi Distribution | Book Value | 42,888 | 51% | 13 |
| Odisha DISCOM | Regulated Equity | 55,692 | 51% | 17 |
| Solar EPC | 20x FY27E earnings | 101,156 | 89% | 32 |
| Solar Manufacturing | 30x FY27E earnings | 293,338 | 89% | 92 |
| Pumped Storage | 2.5x Equity Book | 84,084 | 100% | 26 |
| Tata Power Renewables | 11x EV/EBITDA | 362,768 | 89% | 114 |
| Total SoTP Valuation | 1,503,000 | 470 |
Key Financial Metrics and Outlook
Tata Power’s financial summary for FY25 indicates consistent growth:
Net revenue: Rs 645bn (up 4.8% YoY)
EBITDA: Rs 127bn, margin at 19.7%
Net profit: Rs 39.7bn, up 7.4% YoY
EPS: Rs 12.4; RoE: 12.5%; RoCE: 8.4%
The stock trades at a P/E of 29.8x FY25 earnings, with a dividend yield of 0.6%.
Risks and Monitorables
Key risks include delays in RE project execution, underperformance in EPC orders, and lag in pumped storage projects. Additionally, regulatory changes in power tariffs and state-level reforms can influence performance.
Actionable Investment View
ICICI Securities maintains a firm BUY stance, underpinned by Tata Power’s robust expansion in green energy, solar manufacturing, and new verticals like pumped storage and nuclear.
Investors looking for long-term exposure to India’s energy transition theme may find Tata Power a compelling opportunity, with a target of Rs 470 offering attractive upside potential.
Disclaimer: Investors are advised to conduct their own due diligence or consult financial advisors before taking any investment decisions.
