With Tata Power slated to declare Q2FY25 results on October 30, 2023, analysts see an 11% YoY growth in revenue-primarily led by the solar EPC division of the company. Meanwhile, with the solar as well as transmission businesses of Tata Power still registering healthy growth, market consensus does expect EBITDA margins to dip a little as external cost pressures go on to affect them.
Excellent Revenue Growth Through Solar EPC and Transmission
Tata Power is likely to report ₹17,522 crore revenue in the quarter ended September. That would represent an 11% rise from the corresponding quarter last year. Growth primarily reflects increased demand in the solar EPC and transmission business that the company has been expanding into; it’s picking up across both domestic and international markets. The focus on renewable energy aligns well with production-linked incentive (PLI) schemes and other ambitious expansion plans of the government for solar capacity.
Nomura has reported that Tata Power’s EPC business has been going great, and a massive order book worth ₹15,700 crore awaits the company. According to the report, “Current demand for solar energy projects coupled with an integrated module manufacturing facility, sets Tata Power up for continued growth.” The steady order pipeline will not only enhance the visibility of growth but also make Tata Power better placed in the renewable energy markets.
Solar Manufacturing Operations to Bolster Growth Prospects
Another significant growth driver has been the new solar cell and module manufacturing operations by Tata Power. As Elara Securities highlighted in a report in October, its 4 GW solar cell and module plant are “on track, where module unit is operational now producing 130 MW in Q4FY24 and 615 MW in Q1FY25.”. The cell manufacturing unit is expected to come on board and add to revenues by Q2FY25 and stabilize by December 2025, thereby helping Tata Power increase its capacities meeting increasing solar demand.
According to Elara Securities estimates, the company’s top line will grow at about 9% YoY while profit after tax would rise by 11% YoY with improved capacities from the manufacturing units.
An Unhomogeneous Expectations on Profitability
While Tata Power’s revenues are upbeat, the firm’s EBITDA margins may witness slight pressure. Analysts expect it to be at 19.2%, down by a small margin of 0.4 percentage points from last year’s 19.6%. The reduction on the estimated side is mainly due to Tata Power’s Indonesian coal operations, which have been erstwhile one of the biggest profit earners for the firm.
JM Financial remains more sanguine about Tata Power’s Q2 performance. In its estimate, the net sales would remain nearly flat as there would be a decline of nearly 8% in the EBITDA margin on lesser earnings from Indonesian coal mines. Moreover, the firm estimates PAT to come in lower with lesser other income and an increase in depreciation. In that case also, JM Financial retains a ‘buy’ recommendation on the stock saying long-term prospects for it on renewable energy remain high.
A Closer Look at Tata Power’s Market-Standing
Tata Power shares have shown remarkable strength, rising by around 77% in the last year. Based on market data, there are 14 brokerages that recommend a ‘buy’ on Tata Power, five suggest a ‘hold,’ and eight advocate a ‘sell,’ indicating mixed sentiment for the company, which is being battered by near-term margin pressures and long-term growth prospects.
The company is a leader in the rooftop solar market, wherein it enjoys a 13% market share. Tata Power has a solid position in utility-scale solar, with an order book of about ₹13,000 crore, according to Nomura. Analysts feel that such a strong order book combined with the favourable government policies for renewable energy puts Tata Power on a firm growth trajectory.
Main points from the Q2 Tata Power Report
There would be lots of eyeballs on the key results which Tata Power would publish today with the quarterly results: whether it would have further additions to its long-term renewable energy order book or some fresh capex, would also know more about what has been happening in the company’s EPC as well as rooftop solar segments. Capex plans shall reflect how it is working strategically towards enhancing its overall green energy portfolio, going ahead.
Conclusion: Tata Power’s Green Energy Future
Tata Power Q2FY25 results would reflect strategic progress in the form of higher growth in solar EPC and module manufacturing, contributing to the business. However, near-term pressure might come from relatively reduced margin and external cost, whereas Tata Power enjoys the power of a significant order book and leadership position in solar.
As the renewable energy scenario of India expands, integrated efforts and support mechanisms offered by the government of Tata Power have strengthened its competitive positioning. Although further details regarding Q2 results of the company are yet to be reported, Tata Power is one such investment that would definitely offer an exciting exposure in terms of green energy transition happening in India. In balancing cost management and the ramp-up of renewable projects, Tata Power is well poised to take advantage of this continued shift toward sustainable energy solutions.
0 Comments