Multibagger Tata stock slips 3% even as PAT soars for 16th straight quarter; brokerages bearish

With net debt to underlying EBITDA improving to 2.65x (from 2.73x in Q1 FY24) and net debt to equity improving to 1.02x (from 1.09x in Q1 FY24) during the quarter, the company’s balance sheet continues to strengthen.

The earnings before interest, taxes, depreciation and amortisation (EBITDA) jumped 51 percent to Rs 3,087 crore, leading to an all-time high EBITDA of Rs 6,092 crore in the first six months of FY24.

Shares of integrated power utility company began Thursday's session (November 9) on a muted note even after it posted strong Q2 results after market hours on Wednesday. In early trade, the stock hit the day's low of Rs 250.35, shedding 1.79 per cent. In the previous session, shares of the Tata Group company ended over 2 per cent higher at Rs 254.9 apiece on the BSE.

The company's consolidated net profit rose 9 percent on-year to Rs Rs 1,017.41 crore in September quarter given higher realisation of revenue from the company's core business i.e. of power generation, transmission and transmission. Total income in the quarter under review surged to Rs 16,029.54 crore in the July-September quarter from Rs 14,181.07 crore in the same period a year ago.

Furthermore, the company highlighted that during the quarter, a significant 84 per cent contribution to the company's Profit After Tax (PAT) came from the core businesses, while the contributions from overseas joint ventures, including coal mining operations, continued to decline.

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The earnings before interest, taxes, depreciation and amortisation (EBITDA) jumped 51 percent to Rs 3,087 crore, leading to an all-time high EBITDA of Rs 6,092 crore in the first six months of FY24.

"With net debt to underlying EBITDA improving to 2.65x (from 2.73x in Q1 FY24) and net debt to equity improving to 1.02x (from 1.09x in Q1 FY24) during the quarter, the company’s balance sheet continues to strengthen. Acknowledging these strong business fundamentals, Moody’s has upgraded Tata Power’s corporate family rating to Ba1/Stable from Ba2/Stable,"added the company's filing.

Here's what brokerages suggest on Tata Power after its Q2 show

CLSA maintaining a bearish view on the counter has iterated a 'Sell'rating on Tata Power with a raise target of Rs 205. For the brokerage, the company's PAT improved on lower deferred taxes. The global brokerage further pointed that the collapse in the indo coal profits led to 4 per cent YoY fall in profit before tax. Weak coal prices remain the key -ve catalyst for the largecap company leading to risk to its EPS, added CLSA.

Morgan Stanley also continued with its 'underweight' stance on the stock with a target price of Rs 207. The brokerage said the company's core business improved, reflecting better performance in Odisha discoms, improving wind PLF, & improving execution & margin in solar EPC business. Mundra & coal's combined profitability declined 50% in 1HF24. Further, it highlighted that the company's net debt decreased only marginally in 2Q.

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