TATA Power Company Limited Research Report

 

Industry

Market Price

Recommendation

Target

Time Horizon

Energy

  207.50

Buy

245

8 months

 

Q4 FY 2022 Review

TATA Power Company Limited reported net revenue of ₹11,959.96 crores for the quarter ended March 31, 2022, compared to ₹10,362.60 crores for March 31, 2021. EBIT and Net Profit were ₹1282.28 crores and ₹632.37 crores for the quarter ended, 31, March 2022, as compared to ₹988.22 crores and ₹481.21 crores, during the corresponding quarter of the previous year.

 

TATA Power Company Limited - Investment Summary

CMP (₹)

207.50

52 Week H/L

298/118

Market Cap (crores)

64,849

Face Value (₹)

1.00

Promoter Holding (%)

46.86

Non-Promoter Holding (%)

53.14

Total (%)

100.00

Book Value

₹70.20

EPS TTM

₹6.96

 

TATA Power Company Limited - Overview

  • TATA Power Company Limited, along with its subsidiaries and joint ventures, is India's largest private sector power utility, with over 13,515 MW of installed power generation capacity.

  • TATA Power operates in all segments of the power industry, including generation (thermal, hydro, solar, wind, and liquid fuel), transmission, and distribution.

  • TATA Power has committed to achieving carbon neutrality before 2050.

  • The company has been assigned an AA stable credit rating on a long-term bank facility.

TATA Power Company Limited Overview

 

Beta: 1.10

Alpha: 32.19

Risk Reward Ratio: 1.32

Margin of Safety: 16%

 

TATA Power Company Limited - Quarterly Summary

 Particular

Mar-22

Dec-21

Sep-21

Jun-21

Mar-21

Revenue from Operations

11,959.96

10,913.14

9,810.22

10,132.35

10,362.60

Other income

259.40

105.59

377.11

177.86

95.09

Total Income

12,219.36

11,018.73

10,187.33

10,310.21

10,457.69

 

         

Total Expenditure

10,937.08

10,037.50

8,917.75

8,534.37

9,469.47

EBIT

1,282.28

981.23

1,269.58

1,775.84

988.22

 

         

Finance cost

1,014.60

952.60

946.39

945.43

890.49

EBT before Exceptional Items

267.68

28.63

323.19

830.41

97.73

 

         

Exceptional items

270.88

759.86

314.55

207.80

364.92

PBT

538.56

788.49

637.74

1,038.21

462.65

 

         

Tax Expenses

-561.64

236.60

132.08

572.59

-107.79

PAT from Continued Operations

1,100.20

551.89

505.66

465.62

570.44

Profit from Discontinued Operations

-467.83

     

-89.23

Net Profit

632.37

551.89

505.66

465.62

481.21

 

Business
  • TATA Power Company Limited, with over 13,515 MW of installed power generation capacity, is India's largest private sector power utility. It has been in business for over 107 years, having begun its operations in 1915.

  • The company operates in all areas of the power industry, including generation, transmission, and distribution.

  • Tata Power currently has 34% clean energy generation in its portfolio, which includes solar and wind generation. They hope to increase this to 50-60 percent in the coming years.

  • During FY20, the company was awarded a long-term coal mining license for the Krutogorovskya coal deposit in the Russian Federation's Sobolevo District, Kamchatka, to explore cheaper and sustainable coal supply for its subsidiary, Coastal Gujarat Power Limited (CGPL).

  • In order to achieve zero carbon emissions, the company intends to limit its exposure to thermal projects and will not expand its coal-fired power plant beyond its current size.

  • In FY20, the company partnered with the Rockefeller Foundation to deploy 10,000 microgrids in order to provide innovative solutions for underserved communities and expand the global microgrid footprint.

  • Tata Power has signed a Power Purchase Agreement with Apollo Gleneagles Hospital in Kolkata to commission

  • India's largest health sector carport in FY21, as well as a Power Purchase Agreement with Tata Motors to commission India's Largest Carport in Pune.

  • Tata Power took over power distribution in Western and Southern Odisha on January 1, 2021, after acquiring four distribution entities in the state (CESU, WESCO, SOUTHCO, and NESCO).

  • The Company has major plans to scale up consumer businesses, such as rooftop solar, EV charging, solar pumps, microgrids, energy efficiency solutions, and home automation.

  • Segments and Value Chain

    Segments

    Capacity

    Renewable Energy Generation

    3,400 (MW)

    Conventional Energy Generation

    10,115 (MW)

    Transmission

    3,552 Ckm

    Distribution

    12.3 million Customer Base

    EV Charging Infrastructure

    2200+ Charging points

     

  • Out of the total revenue, 24% of revenue have been generated from Generation activities, 16.6% from Renewables, 58.8% from Transmission and Generation, and 0.7% from others % in FY 2022, compared to 36.9%, 16.2%, 46.2% and 0.7% in FY 2021.

    TATA Power Company Limited Segment Wise Revenue Breakdown

 

TATA Power Company Limited - Revenue Trend

TATA Power Company Limited - Topline and Bottomline trend (crores)

TATA Power Company Limited Revenue Trend

 

TATA Power Company Limited EBIT Margin

 

TATA Power Company Limited Shareholding Pattern

 

TATA Power Company Limited Chart Title

 

TATA Power Company Limited - Ratio Analysis

 

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Profitability Ratio

         

Gross Profit

43.46%

41.05%

46.53%

48.11%

48.59%

EBITDA Margin

24.98%

23.87%

29.19%

22.76%

19.69%

EBIT Margin

16.24%

15.86%

20.15%

14.36%

12.40%

Pre-Tax Margin

10.60%

12.78%

8.13%

6.08%

7.01%

Net Profit Margin

8.56%

7.31%

2.90%

2.92%

4.00%

 

         

Return on Investment

         

Return on Asset – ROA

 

2.63%

0.97%

1.01%

1.62%

Return on Capital Employed – ROCE

 

8.54%

7.91%

8.97%

6.62%

Return on Equity – ROE

 

11.24%

4.00%

4.06%

6.68%

 

         

Liquidity Ratio

         

Current ratio (x)

0.26

0.37

0.45

0.52

0.56

Quick Ratio

0.22

0.31

0.39

0.46

0.45

 

         

Turnover Ratio

         

Receivables Turnover

 

44.18

55.57

53.72

47.65

Inventory Turnover

 

33.76

39.10

38.14

48.68

Payables Turnover

 

112.46

119.58

128.33

140.12

Asset Turnover

 

0.36

0.34

0.35

0.40

 

         

Solvency Ratio

         

Debt to Equity

3.38

3.06

3.05

2.91

3.31

Interest Coverage Ratio

1.2

1.1

1.3

1.2

1.4

 

TATA Power Company Limited - Financial Overview

TATA Power Company Limited - Profit and Loss Statement (₹ in crores)

Particular

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Revenue

26,840.27

29,881.06

29,136.37

32,703.31

42,815.6

Other income

432.69

386.15

562.61

439.24

919.96

Total Revenue

27,272.96

30,267.21

29,698.98

33,142.55

43,735.6

           

Cost of Power Purchased

5,597.32

6,359.53

6,220.46

8,334.41

14,640.6

Cost of Fuel

10,009.86

11,640.02

9,922.39

9,074.96

8,290.92

Gross Profit

11,665.78

12,267.66

13,556.13

15,733.18

20,804.0

           

Transmission Charges

281.99

248.23

214

504.6

1,018.19

Raw Material Consumed

748.97

919.35

957.18

2,628.19

3,832.83

Purchase of Finished Goods, Spares and Shares

181.68

345.22

111.74

28.89

49.11

(Increase)/Decrease in Stock-in-Trade and Work in Progress

-8.51

24.37

-15.64

0.41

-199.22

Employees Benefits Expenses

1,381.92

1,339.05

1,440.64

2,316.67

3,611.63

Other Expenses

2,374.11

2,260.15

2,342.78

2,812.48

4,060.42

EBITDA

6,705.62

7,131.29

8,505.43

7,441.94

8,431.13

           

Depreciation, Amortisation, and Impairment

2,346.17

2,393.13

2,633.56

2,744.94

3,122.20

EBIT

4,359.45

4,738.16

5,871.87

4,697.00

5,308.93

           

Finance cost

3,761.48

4,170.00

4,493.73

4,010.39

3,859.02

EBT before Exceptional Items

597.97

568.16

1,378.14

686.61

1,449.91

           

Share of Net Profit of Associates and Joint Ventures

1,553.91

1,401.83

952.55

873.39

1,942.83

Net movement in Regulatory Deferral Balance

-409.85

103.27

-188.69

536.02

-239.47

Exceptional items

1,102.53

1,745.83

226.16

-109.29

-150.27

EBT

2,844.56

3,819.09

2,368.16

1,986.73

3,003.00

           

tax expenses

161.97

1,087.59

641.49

501.88

379.56

Profit from Continuing Operations

2,682.59

2,731.50

1,726.67

1,484.85

2,623.44

Loss for the Year from Discontinued Operations

-71.74

-125.84

-410.23

-46.2

-467.83

PAT before Non-Controlling Interest and non-perpetual Securities

2,610.85

2,605.66

1,316.44

1,438.65

2,155.61

           

Non-Controlling Interest

202.55

249.47

299.06

311.27

414.15

Net Profit before non-perpetual Securities

2,408.30

2,356.19

1,017.38

1,127.38

1,741.46

           

Distribution of Perpetual Securities

111.82

171

171

171.23

29.52

Net Profit attributable to Owner of the company

2,296.48

2,185.19

846.38

956.15

1,711.94

EPS

         

Basic

8.48

8.07

3.13

3.17

5.35

Diluted

8.48

8.07

3.13

3.17

5.35

           

Number of shares

         

Basic

270.76

270.76

270.76

301.81

319.82

Diluted

270.76

270.76

270.76

301.81

319.82

 

TATA Power Company Limited - Cash Flow Statement (₹ in crores)

 

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Net Profit Before Tax

2,844.56

3,819.09

2,368.16

1,986.73

3,003.00

Net Cash from Operating Activities

6,363.85

4,573.79

7,375.32

8,345.12

6,692.73

Net Cash Used for Investing Activities

-1,517.86

-319.24

-542.93

667.60

-6,276.57

Net Cash From (Used For) Financing Activities

-4,726.26

-5,184.45

-5,109.57

-7,602.88

-1,183.20

Net Increase in Cash and Cash Equivalents

119.73

-929.90

1,722.82

1,409.84

-767.04

Cash And Cash Equivalents at The Beginning of The Year

818.58

944.52

61.52

1834.38

3569.95

Cash And Cash Equivalents at The End of Year

944.52

61.52

1,834.38

3,569.95

2,829.01

 

TATA Power Company Limited - Balance Sheet (₹ in crores)
 

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

ASSETS:-

         

Non-Current Assets:

         

Property, Plant & Equipment

41,431.61

41,101.50

44,662.61

45,356.46

50,502.96

Right of Use Assets

     

3,682.27

3,661.99

Capital WIP

1,652.60

2,575.70

1,611.52

3,270.26

4,635.10

Goodwill

1,641.57

1,641.57

1,641.57

1,794.57

1,858.31

Other intangible assets

1,583.08

1,561.82

1,362.18

1,345.85

1,366.18

Investments accounted for using the Equity Method

11,530.27

12,513.48

13,202.65

11,920.63

12,580.00

Financial Assets:

         

Other Investments

881.11

861.41

632.68

728.88

1,169.81

Trade Receivables

190.05

192.99

30.28

604.71

685.78

Loans

77.56

90.56

80.88

4.6

3.45

Finance Lease Receivables

574.76

565.62

588.92

598.61

588.69

Other financial assets

273.68

316.75

578.79

1,919.25

1,684.53

Non-Current Tax Assets (net)

167.59

238.01

342

359.83

520.54

Deferred tax assets (net)

118.17

89.49

74.24

184.02

334.6

Other non-current assets

1,577.31

1,358.07

1,185.12

1,459.24

1,849.82

Total Non Current Assets

61,699.36

63,106.97

65,993.44

73,229.18

81,441.76

           

Current Assets:

         

Inventories

1,623.08

1,706.42

1,752.35

1,885.62

4,231.52

Financial Assets:

         

Investments

436.16

166.98

699.51

499.54

410.52

Trade Receivables

2,788.93

4,445.26

4,425.90

5,200.08

5,979.74

Unbilled Revenue

810.09

837.85

799.42

1,591.14

2,285.57

Cash and cash equivalents

1,061.16

645.45

1,861.50

3,669.62

3,077.24

Bank balances other than cash and cash equivalents

124.62

142.00

232.68

2,201.05

3,563.46

Loans

754.47

87.18

33.00

7.63

9.34

Finance Lease Receivables

34.27

37.90

33.20

41.45

46.91

Other Financial Assets

401.59

241.59

1,412.43

329.61

501.45

Current Tax Assets (Net)

14.77

2.67

1.10

 

0.01

Other Current Assets

1,512.32

1,881.85

770.39

914.04

1,479.67

Total Current Assets

9,561.46

10,195.15

12,021.48

16,339.78

21,585.43

Assets Classified as Held For Sale

4,339.26

5,102.68

6,253.06

3,047.46

3,046.83

Regulatory Deferral Account - Assets .

6,304.56

5,758.13

5,480.17

6,222.44

6,810.57

Total Assets

81,904.64

84,162.93

89,748.15

98,838.86

1,12,884.59

           

EQUITIES & LIABILITIES

         

Equity

         

Equity share capital

270.5

270.5

270.5

319.56

319.56

Unsecured Perpetual Securities

1,500.00

1,500.00

1,500.00

1,500.00

 

Other equity

14,608.55

16,535.01

17,795.52

20,502.70

22,122.00

Equity attributable to owners of the company

16,379.05

18,305.51

19,566.02

22,322.26

22,441.56

           

Non-controlling interests

2,015.29

2,166.66

2,332.04

2,927.30

3,586.90

Total Equity

18,394.34

20,472.17

21,898.06

25,249.56

26,028.46

           

Liabilities:

         

Non Current Liabilities

         

Financial Liabilities

         

Borrowings

22,356.31

31,139.23

32,695.14

30,044.85

32,729.70

Lease Liabilities

   

3,180.48

3,142.48

3,207.79

Trade Payables

21.00

22.75

 

1.67

 

Other financial liabilities

647.31

687.31

721.52

1,371.00

1,156.56

Noncurrent tax liabilities

3.74

3.74

3.03

3.03

3.03

Deferred tax liabilities

516.56

1,056.81

1,174.04

976.15

1,033.30

Provisions

300.00

333.60

407.40

667.27

1,218.18

other non current liabilities

1,841.48

1,873.75

2,084.52

5,987.06

8,139.29

Total Non Current Liabilities

25,686.40

35,117.19

40,266.13

42,193.51

47,487.85

           

Current Liabilities

         

Financial Liabilities

         

Borrowings

18,827.28

13,875.38

11,844.36

13,125.79

14,860.30

Lease Liabilities

   

379.74

394.83

397.33

Trade Payables

5,609.82

5,481.49

5,095.44

7,146.41

10,459.60

Other Financial Liabilities

9,942.98

6,480.79

7,502.90

7,647.70

9,631.96

Current tax liabilities (Net)

160.38

150.22

129.49

198.38

147

Provisions

108.94

93.55

116.42

163.31

344.82

Other Current Liabilities

1,785.72

1,499.64

1,453.08

2,480.66

2,779.08

Total Current Liabilities

36,435.12

27,581.07

26,521.43

31,157.08

38,620.09

Liabilities directly associated with Assets Classified as Held For Sale

903.78

992.5

1,062.53

139.78

113.56

Regulatory Deferral Account - Liability

485

   

98.93

634.63

Total Equity and Liabilities

81,904.64

84,162.93

89,748.15

98,838.86

1,12,884.59

 

Industry Overview
  • With an installed power capacity of 395.07GW as of January 2022, India is the world's third-largest producer and second-largest consumer of electricity.

  • More industrial activity will drive up energy demand, while a growing population, increased electrification, and per-capita usage will give an additional push.

  • In January 2022, India's installed renewable energy capacity was 152.36 GW, accounting for 38.56% of the total installed power capacity.

  • India is on track to achieve the Saubhagya scheme's goal of 100 % hold electrification. The Saubhagya project had electrified about 2.82 crore households as of March 2021.

  • The government earmarked Rs.19,500 crore (the US $2.57 billion) in the Union Budget 2022-23 for a PLI scheme to stimulate the manufacturing of high-efficiency solar modules.

  • The Government has allowed 100% FDI in the power sector, which has boosted FDI inflow in this sector.

  • Between FY19 and FY23, India's electricity sector is expected to attract investment worth Rs. 9-9.5 trillion (US $128.24-135.37 billion).

  • India wants to lower the emissions intensity of its gross domestic product (GDP) to 33% by 2030 from 35% and boost the use of non-fossil fuels to 40% of total energy generation capacity.

  • From April 2000 to December 2021, India received US$ 11.21 billion in FDI in the non-conventional energy industry. Since 2000, the new renewable energy sectors have added the most power-producing capacity.

  • Coal-based capacity continues to dominate India's total installed capacity, accounting for half of all installed capacity, However the share has steadily declined over the last ten years, falling from 56 percent in FY12 to around 52 percent in FY22. Despite the fact that coal is expected to remain a primary source of electricity generation until 2030, decarbonization is fueling exponential growth in renewable capacity installations, led by solar and wind.

  • Microgrids and battery energy storage systems have become common grid components. Advanced nuclear power designs and hydrogen-based energy schemes are gradually progressing, and carbon capture and storage (CCS) is becoming the new norm, focusing on climate change as industrialization accelerates.

  • Electric vehicles are rapidly expanding as they play a critical role in the ambitious zero-emission targets set by nations around the world. EV sales have been steadily increasing in recent years.

  • India's per capita power consumption has been increasing at a rate of roughly 5% per year, reaching 1208 kWh/person by FY 2019-20, which is low compared to the global average of around 3316 kWh/person. This opens the door for more development in this sector.

 

Concall Overview (Q3FY2021)
  • The company has secured a 10-year extension of its Indonesian coal mining license with revised royalty and taxation norms, which will have a largely neutral impact on coal business profits.

  • Tata Power has signed a binding agreement with a consortium of BlackRock and Mubadala to raise 4,000 crores for its renewable platform, which will create the most comprehensive renewable platform with Utility-Scale businesses, such as large solar capacities, EPC, and manufacturing, as well as customer-centric businesses such as Rooftop Solar, Solar Pumps, and EV Charging.

  • Coal mine operations were hampered in the fourth quarter due to supply issues and heavy rains in Indonesia from January to March.

  • The company has completed the merger of CGPL with Tata Power Standalone, w.e.f. April 1, 2020. The union of CGPL and Tata Power will assist the company in streamlining operations and utilizing capital more efficiently across the various businesses in the standalone entity, in addition to other financial synergies.

 

TATA Power Company Limited - Technical Analysis

TATA Power Company Limited Technical Analysis

  • Stock is trading above EMA 200 and MA 200 indicators, with a support level of ₹200 and a resistance level at ₹238.

  • One can accumulate this share at the current price.

 

Recommendation Rationale:
  • For the FY22, TATA Power Company Limited revenue increased to ₹ 42,815.67 crores, compared to the previous year at ₹32,703.31. It also registered a net Profit After Tax of ₹1711.94 crores compared to the last year at ₹956.15 crores.

  • The company's Transmission & Distribution business serves over 12 million customers in 4 Indian states and union territories, with over 3,500 circuit km of transmission lines. The SOAR strategy is expected to grow the business in the long run. Its goal is to have more than 40 million customers and a transmission capacity of more than 10,000 circuit km.

  • The company has got eligible for the PLI scheme.

  • Over the next five years, the company plans to increase its clean energy portfolio by more than 60 percent.

  • Tata Power EZ Charge installed 13,000+ home chargers and 2,200+ EV charging points until the end of FY22, demonstrating the company's success in the EV business.

  • The company has also created a strong software platform for EV charging customers and released a mobile-based application (Tata Power EZ Charge) to provide value-added services to customers.

  • It has installed over 191 microgrids as of March 2022, benefiting a rural consumer base of over 14,000 people.

  • The company has secured a 10-year extension of its Indonesian coal mining license with revised royalty and taxation norms, which will have a largely neutral impact on coal business profits.

  • Recent collaborations in the EV infrastructure space include:

  • An agreement with TVS Motor Company to collaborate on an electric two-wheeler charging ecosystem in India.

  • Collaboration with Apollo Tyers to install charging stations at its vehicle zones across India

  • Tata Power and Am Stays & Trails have teamed up to install EV charging stations to promote greener tourism.

 

Valuation
  • The company’s revenue has increased at a CAGR of 12.38% from FY 2019-2022.

  • The company’s ROE and ROCE for the year 2022 were 6.68% and 6.62%, respectively.

  • Q1FY2023 results could be impacted due to the increasing inflation and increasing coal prices.

  • Based on the company's performance in FY22 and the increasing government effort to generate carbon-free electricity, TATA Power can benefit and is expected to generate more revenue.

  • We have taken data for the last five years (2018-2022) and forecasted revenue for FY 2023-2027. Revenue growth is assumed to be %.

 

Estimated Income Statement (₹ in crores):

 

Mar-23

Mar-24

Mar-25

Mar-26

Mar-27

 

2023-E

2024-E

2023-E

2024-E

2023-E

Revenue

49,558.63

56,168.94

63,673.25

72,192.72

81,864.94

COGS

26,286.95

29,604.36

33,698.42

38,311.90

43,437.29

Gross Profit

23,271.68

26,564.57

29,974.83

33,880.82

38,427.65

Employee Expenses

3,772.74

4,470.75

4,970.95

5,705.00

6,444.29

Other Expenses

9,415.78

10,995.12

12,313.81

14,080.84

15,934.37

EBITDA

10,083.16

11,098.71

12,690.08

14,094.98

16,048.98

Depreciation

3,352.99

3,434.83

3,550.89

3,704.36

3,898.99

EBIT

6,730.17

7,663.88

9,139.19

10,390.62

12,149.99

Financial Cost

4,892.11

5,570.81

6,643.21

7,552.86

8,831.74

EBT

1,838.06

2,093.06

2,495.98

2,837.76

3,318.26

Tax expenses

232.32

264.55

315.48

358.67

419.41

PAT

1,605.74

1,828.51

2,180.51

2,479.08

2,898.85

 

  • We initiate coverage on TATA Power Company Limited with a “BUY” and a 8 month Target Price of 245.

 

Disclaimer: This report is only for the information of our customers Recommendations, opinions, or suggestions are given with the understanding that readers acting on this information assume all risks involved. The information provided herein is not to be construed as an offer to buy or sell securities of any kind.

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DISCLAIMER

This report is only for the information of our customers. Recommendations, opinions, or suggestions are given with the understanding that readers acting on this information assume all risks involved. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. ATS and/or its group companies do not as assume any responsibility or liability resulting from the use of such information.

 

 

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