Transmission capex, renewable energy segment may energise Tata Power stock

Tata Power reported strong results in the fourth quarter of 2024-25 (Q4FY25) . Consolidated revenue rose 8 per cent year-on-year ( Y-o-Y) to  ₹17,100 crore and net profit surged 25 per cent Y-o-Y to  ₹1,300 crore. Operating profit grew 39 per cent Y-o-Y to  ₹3,200 crore.

 

The company added 1,026 megawatt (MW) of renewable energy (RE) capacity in FY25, including 166 MW in Q4. The 4.3 gigawatt or GW module and cell facility is at 90 per cent utilisation with all four cell lines active. The solar engineering procurement and construction or EPC order book is at  ₹11,400 crore for utility-scale projects, ₹864 crore for rooftop and ₹1,036 crore for third-party rooftop. The RE segment will drive growth.

 

Depreciation was up 7 per cent Y-o-Y to  ₹1,100 crore  and interest up 7 per cent Y-o-Y to  ₹1,200 crore. Tax dropped 40 per cent Y-o-Y to  ₹290 crore.

 

Revenue from generation increased 9 per cent Y-o-Y to  ₹5,300 crore. Plant load factor (PLF) for thermal declined to 73 per cent in Q4FY25 ( 74 per cent last year). PLF for solar was 25 per cent in Q4FY25 (24 per cent last year) and for wind was 13 per cent in Q4FY25 (14 per cent last year). PLF for Mundra increased to 73 per cent in Q4FY25 ( 60 per cent last year).

 

The hydro PLF was at 30 per cent in Q4FY25 (36 per cent last year). Revenue from RE was stable at  ₹3,500 crore. Revenue from transmission and distribution rose 6 per cent Y-o-Y to  ₹9,600 crore. Another 5.5 GW is to be commissioned in the next 6-24 months. 

 

For FY25, consolidated revenue increased 6 per cent Y-o-Y to ₹65,400 crore, while operating profit stood at ₹13,900 crore. Reported net profit was ₹3,970 crore (up 7 per cent Y-o-Y). Capex of ₹16,200 crore was incurred in FY25, including ₹4,100 crore in Q4FY25, lower than guidance of ₹21,000 crore. New RE capacity in Q4 stood at 166 MW, less than guidance of 0.6GW.

 

Tata Power Solar had revenues of ₹3,110 crore (down 27 per cent Y-o-Y, up 78 per cent Q-o-Q), with a healthy margin of 7.1 per cent and operating profit of ₹220 crore. Management believes margins of 7-8 per cent are sustainable.

 

Tata Power benefits from  transmission capex, reforms in distribution and green capex. It targets RE capacity of 15GW by FY27 and has capex plans of ₹84,200 crore for FY24-27. It is implementing 2.8GW of pumped hydro storage projects.

 

Other positives are improvement in Odisha distribution, better returns in Mundra and cell and module ramp-up. Odisha discoms saw net profit increasing by 3 times to ₹275 crore. The rooftop business will almost double in FY26.

 

For FY26, the capex target is ₹25000 cr (60 per cent for RE expansion and 30 per cent for transmission and distribution). Guidance is for 2.5-2.7GW of  new RE capacity in FY26. Bidding for state discoms in UP may be a new trigger. 

 

In cell and module, guidance is for over 3,700 MW.  In FY25, about 3,300 MW of modules were supplied. In Q4FY25, 913 MW of modules and 650 MW of cells were supplied.

 

The Mundra generation, coal and shipping cluster reported ₹170 crore net profit (₹40 crore loss in Q4FY24). Net profit from Mundra plant improved from ₹57 crore in FY24 to ₹110 crore in FY25, with all five units under Section 11, and regulatory gain of ₹32 crore.

 

The aggregate transmission capacity, including ongoing projects, will be over 7,000 circuit kilometres or ckm (2,414ckm under construction). The 600MW Dagachhu hydro project in Bhutan has started, with completion by Nov 2029.

 

Net debt was ₹44,700 crore, while net debt to operating profit ratio was 2.93 times. The net debt:equity improved to 1.0 time from 1.1 times in Q3FY25.

 

Valuation is tricky. Regulated equity and coal is low multiple. RE is higher valued. Overall, the stock is highly valued, which implies positives are factored in.