Target: ₹260

CMP: ₹218.15

Tata Power Company Ltd’s (TPCL) Q1-FY23 reported PAT of ₹795 crore (up 103 per cent year-on-year) was 47 per cent above our estimate of ₹540 crore, led by higher integrated CGPL + coal profit, robust growth in RE power generation PAT, and strong standalone performance partially offset by loss in solar EPC/Tata Projects. Integrated CGPL + coal profits grew strongly by 3.4x year-on-year to ₹506 crore, led by higher coal profits (up 2.4x quarter-on-quarter to ₹968 crore) and likely lower loss at CGPL, given partial benefit of full cost through at Mundra (three units operational) as per interim tariff under section 11 with effect from May 5. Coal profits were aided by higher coal realisation of $150/tonne (up 53 per cent quarter-on-quarter) and volume recovery to 12 million tonne (up 15 per cent quarter-on-quarter). Thus, PAT/tonne grew 72 per cent quarter-on-quarter to $25/tonne. Standalone PAT increased 19 per cent year-on-year to ₹421 crore, led by higher dividend income and tax benefit with CCPL merger. Renewable energy (RE) generation (TPREL + WREL) profit was up 49 per cent to ₹228 crore, reflecting higher power generation/sales and tariff revision benefit of ₹28 crore for WREL.

However, solar EPC business continued to disappoint with EBITDA margin of only 1 per cent (versus 3 per cent/2 per cent in Q1-FY22/Q4-FY22) and net loss of ₹33 crore on higher module cost and forex loss, given adverse forex movement on USD liabilities, while Tata Project also made huge loss of ₹222 crore due to write-offs (as accounting losses on cost of project completion basis) and commodity price inflation. All four Odisha discoms (North, West, Central, and South) reported combined PAT of ₹9 crore versus net loss of ₹19 crore in Q1-FY22; however, TP Western Odisha Distribution Ltd reported higher loss of ₹23 crore.

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