Buy Tata Power; target of Rs 442: Motilal Oswal

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Diversified RE portfolio with 7.2GW operational capacity and 12.4GW total portfolio, providing a strong foundation for growth.
  • Strong IPP commissioning momentum, with 645MW commissioned in 1HFY27, and a target of 2GW for FY27.
  • Attractive valuation for the RE business, trading at ~8x FY28E EV/EBITDA, making it one of the cheapest listed RE plays.
  • Indonesian coal business offers meaningful earnings upside, with every USD10/t increase in coal realization translating into ~INR4b of incremental PAT.

Thesis Validation Checklist

To validate the investment thesis, watch for:

  • Continued strong commissioning of RE capacity, with a focus on meeting the 2GW target for FY27.
  • Improvement in Mundra losses, with a decline to ~INR4b in FY27, driven by the Section 11 extension and subsequent SPPA framework.
  • Growth in the Indonesian coal business, driven by higher coal prices and increased production.
  • Progress on the Kleros arbitration, with a potential provision or adverse appeal ruling being a key risk.
  • Valuation of the RE business, with a focus on the EV/EBITDA multiple and comparison to peers.