Tata Power share price: Tata Power loses 9% after fourth quarter results. What should investors do now?


New Delhi: Shares of Tata Power Company fell more than 9% in early trade on Monday after a mixed performance in the March 2022 quarter.

The stock touched a low of 223.05 on the BSE during today’s session before trading at Rs 229.90 at 10:15 am. The certificate stood at Rs 245.20 on Friday.

Over the past year, the counter has risen almost 110%, although the shares are down 25% from their 52-week high of 298 rupees.

Financial performance
Tata Group’s power arm said its March quarter consolidated net profit stood at Rs 632.37 crore, up 31.41% from Rs 481.21 crore in the same quarter of the year. last year.

The company said its operating revenue was Rs 11,959.96 crore, up 15.41% from the Rs 10,362.60 crore reported in the corresponding quarter of the previous year. .

The Board has also recommended a dividend of Rs 1.75 per share of Rs 1 each (at the rate of 175%) to shareholders for the year ended 31 March 2022.

The company said consolidated PAT (profit after tax) for FY22 before exceptional items increased by 61% year-on-year to Rs 2,298 crore from Rs 1,424 crore for FY21 .

Consolidated revenue increased by 28% to Rs 42,576 crore in FY 2021-22 from Rs 33,239 crore in the prior fiscal year.

On Mundra Power Station
The Group has entered into discussions with GUVNL to enter into a supplementary power purchase agreement (SPPA), the company said in this regard. The discussions are at a very advanced stage and an agreement has been reached except for a few points for which discussions are ongoing and, therefore, the SPPA has not yet been signed and approved.

“To ensure a continuous supply of electricity, GUVNL has asked the group to continue to supply electricity on the basis of the SPPA which will come into force on January 1, 2022. Accordingly, for the quarter ended March 31, 2022, revenue differential of Rs 324 crore has been recognized based on the current SPPA draft agreed,” the company said.

The Center stepped in to tackle the power crisis by invoking Section 11 of the Electricity Act, requiring all imported coal-fired projects to produce electricity at full capacity, sources said. .

It will also contribute to the start-up of the non-operational units of coal-fired power plants imported from Tata Power and Adani Power in Mundra, Gujarat. These units were not operating due to commercial issues.

Analyst call
Global brokerage CLSA has a ‘sell’ rating on Tata Power with a target price on the share of Rs 212, as it finds the stock expensive at a valuation of 24x expected FY24 EPS.

The brokerage said fourth-quarter numbers were weak, boosted by the CGPL merger tax relief, while Indonesia’s coal sector disappointed again.

However, national brokerage firm Sharekhan has maintained a “Buy” rating on Tata Power with a target price of Rs 315.

“Management’s business restructuring plans to increase the share of high-growth RE businesses would lead to sustained improvement in ESG scores,” he said. “In addition, a potential agreement with states for full fuel cost pass-through would improve earnings growth prospects and support the balance sheet deleveraging plan.”

Sharekhan sees slower-than-expected ramp-up of ER portfolio and expansion of distribution business; weaker than expected profitability in the Solar EPC business; the volatility of international coal prices as the main risks for the company.

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