19 August 2020
Update
| Sector:
Utilities
Tata Power
BSE SENSEX
38,615
S&P CNX
11,408
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CMP: INR57
TP: INR66 (+16% )
Buy
Planning for an asset-light and consumer-facing model
Analyst meet takeaways
We attended the analyst meet hosted by Tata Power (TPWR) today, 19 Aug’20. Here
are the key takeaways:
th
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
Financials Snapshot (INR b)
Y/E Mar
Net Sales
EBITDA
PAT
EPS (INR)
Gr. (%)
BV/Sh (INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
2020
291.4
79.4
10.2
3.76
78.2
66.8
5.9
7.1
15.1
0.8
2021E
310.2
76.5
10.6
3.33
-11.6
67.8
5.4
7.0
17.1
0.8
Deleveraging at the forefront
TPWR IN
2,705
153.5 / 2
69 / 27
11/17/-4
892
62.8
2022E
339.8
78.1
14.7
4.61
38.6
70.6
6.7
7.0
12.3
0.8
Tata Power (TPWR) highlighted its focus on addressing legacy issues with
regard to: 1) deleveraging and 2) the self-sustenance of Mundra.
Over the past few months, the co.’s deleveraging process has been
accelerated with the: 1) sale of Cennergi, 2) sale of shipping cos, and 3)
preferential issue to Tata Sons.
The co. plans to continue with its asset monetization plans by exiting non-core
assets and InvIT for renewables. The co. expects the InvIT transaction to be
completed this year. TPWR plans to reduce net debt to INR250b by the end of
FY21 and sustain it at these levels.
The co. plans to simplify its holding structure and generate synergies from the
merger of CGPL, Tata Power Solar, and Aftaab with TPWR. The process for the
same requires the NCLT’s approval (which could take 4–12 months).
With regard to CGPL, the co. plans to reduce its debt by INR40b using
preference and divestment-related proceeds, in turn generating interest cost
savings of INR3.8b. In terms of the PPA amendment for CGPL, the benefit of
compensatory tariff at current prices stands at INR2.5b.
Increasing presence in consumer-facing business
Shareholding pattern (%)
As On
Jun-20 Mar-20 Jun-19
Promoter
37.2
37.2
33.0
DII
31.4
27.8
24.9
FII
12.9
18.6
26.0
Others
18.5
16.3
16.1
FII Includes depository receipts
Stock Performance (1-year)
Tata Power Co.
Sensex - Rebased
80
60
40
20
TPWR aims to more than double its revenues in FY25, aided by a strong
presence in Rooftop Solar and Solar Pumps, new businesses (such as EV
Charging and Home Automation) and T&D.
TPWR targets revenue from the T&D business to increase to INR270b in FY25
(v/s INR120b currently) through new opportunities in distribution (INR120b)
and CESU. The co expects DISCOM privatization opportunities to emerge in
Uttar Pradesh, Rajasthan, and Jharkhand. The co. would be keen to take over
projects through the license model instead of the franchise model.
In addition, the co. plans to expand in new energy businesses, such as Home
Automation and EV Charging, with targeted revenue of INR35b in FY25. Capital
expenditure for the new energy businesses would be small at ~INR20b across
five years.
The co. expects revenues from Rooftop Solar and Solar Pumps to rise with
increased capacity and market share; it targets INR100b revenues from the
segment by FY25.
Aniket Mittal – Research Analyst
(Aniket.Mittal@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.