MOSL: TATA POWER (Upgrade to Neutral)-New MD identifies growth areas in RE and T&D
TATA POWER: New MD identifies growth areas in RE and T&D; Deleveraging and coal prices driving earnings; upgrading to Neutral
(TPWR IN, Mkt Cap USD3.5b, CMP INR79, TP INR77, 2% Downside, Upgrade to Neutral)
Tata Power (TPWR) hosted its annual analyst meet on 5th June 2018. We are enthused with the new MD Praveer Sinha’s focus on deleveraging, prudent capital allocation and identifying new areas of growth that are less capital intensive. We, thus, upgrade our rating on the stock to Neutral.
Sale of non-core assets is aiding deleveraging
Over the last year, TPWR has accelerated the pace of sale of non-core assets. It has finalized divestment plans amounting to ~INR50b, while ~INR25b has been realized – a majority of which has been received in 1QFY19. Sale of its stake in Tata Projects is under discussion. The reported consolidated net debt to equity will decline from 2.7x in FY17 to 2.3x post divestments. TPWR is also evaluating the performance of its overseas power assets for possible consolidation/monetization.
Optimizing operations of CGPL to help contain losses
CGPL continues engaging beneficiaries for a sustainable resolution of partial under-recovery of fuel cost. At the same time, it is taking various steps to contain losses.
- CGPL is optimizing fuel cost by blending of low GCV coal, which is available at a steeper discount.
- CGPL is also in discussion with DISCOMs to sell power beyond minimum commitment of 80% at merchant tariff. However, there is no progress on this.
Tata Power is an integrated power utility based in India. Co. has an installed generation capacity of 8,584 MW in India and a presence in all the segments of the power sector viz. Fuel and Logistics, Generation (thermal, hydro, solar and wind), Transmission, Distribution and Trading. Co. maintains public-private partnerships in Generation, Transmission and Distribution in India. Co. is also active in renewable energy in India and has developed and fully commissioned a 4,000 MW Ultra Mega Power Project at Mundra (Gujarat) based on super-critical technology. Co.'s international presence includes strategic investments in Indonesia, Singapore, South Africa, Australia and Bhutan.
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Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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