Tata Power: Charting path for growth - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Tata Power: Charting path for growth

Oct 23, 2003

Tata Power, India's largest private sector utility, has reported around 12% decrease in the topline for 2QFY04. However, due to reduced tax provision and lower interest outgo, it has managed to post around 27% increase in bottomline.

(Rs m)2QFY032QFY04Change1HFY031HFY04Change
Sales12,02110,625-11.6%22,42521,446-4.4%
Other Income565490-13.3%862732-15.1%
Expenditure8,6217,222-16.2%16,54415,179-8.3%
Operating Profit (EBDIT)3,4003,4030.1%5,8816,2676.6%
Operating Profit Margin (%)28.3%32.0% 26.2%29.2% 
Interest 854617-27.8%1,5721,396-11.2%
Depreciation8048212.1%1,6281,6360.5%
Profit before Tax2,3072,4556.4%3,5443,96611.9%
Tax957745-22.2%1,3571,262-7.0%
Profit after Tax/(Loss)1,3501,71026.6%2,1872,70423.6%
Net profit margin (%)11.2%16.1% 9.8%12.6% 
Diluted no. of Shares (eoy) (m)197.9197.9 197.9197.9 
Diluted Earnings per share*27.334.6 22.127.3 
*(annualised)      
Current P/e ratio 6.3  7.9 

Fuel cost form a major chunk of the total expenditure. A 17% reduction in the same has led to significant improvement in the operating margins. On half yearly basis, fuel cost as percentage of total sales has gone down from 48% to 45%. Cost of power purchased as well as other expenses has also reduced significantly. We expect the margins to improve further as the company has entered in agreement with a leading consultant to curb the operating expenses.

Cost break-up
(Rs m)2QFY032QFY04Change1HFY031HFY04Change
Cost of power purchased1,0801,005-7.0%2,0772,0950.9%
Cost of fuel5,5694,625-17.0%10,8249,808-9.4%
Staff cost20737480.7%55884150.7%
Other expenses1,7661,219-31.0%3,0852,436-21.0%
Total8,6217,223-16.2%16,54415,180-8.2%

In order to grab the opportunity in the power sector, Tata Power is planning to increase generation capacity by another 1,500 MW by 2009. The company has plans to increase its topline by 70% in next five years. As a first step, it is expected to complete a 120 MW expansion at Jojobera by 2005. Today, the company’s board has approved to jointly develop the 330 MW Srinagar hydropower project in Uttaranchal with Synergies Hydro Asia (SHA), at an estimated cost of Rs 16.5 bn.

The distribution business has been a loss-making venture for the company till date. The company’s technical and commercial losses in its Delhi distribution circle are still alarmingly high. However, North Delhi Power Ltd. (NDPL) has brought down the losses to 48% in 9 months of FY03 as compared to 50% FY02 and is required to bring it down to 31% by March 2007.

At the current price level of Rs 216, the stock trades at P/E multiple of 7.9x, annualised 1HFY04 earnings. The company has not explained the cause of the fall in topline during the September quarter. We will try and throw some for light on the issue, once we get a detailed release from the company.

A traditional concern with this company is its moves to enter into unrelated businesses in the past (petrochemicals and broadband communication etc). Though the company has exited from its broadband communications business and is looking to sell off its petro business (Petrodyne), the company’s intentions to invest in ‘adjacent infrastructure businesses’, as mentioned in its 2003 annual report (no clarity regarding the same) continues to raise concerns.

Equitymaster requests your view! Post a comment on "Tata Power: Charting path for growth". Click here!

  

More Views on News

What to Expect from India's Top Renewable Energy Stocks in 2022 (Views On News)

Dec 30, 2021

These renewable energy companies will continue to maintain their leadership position as they bag more projects.

Tata Power is Hot. Here's What's Behind its Electrifying Performance (Views On News)

Oct 21, 2021

Tata Power's stock has risen over 70% in the last month. What's driving the rally?

TATA POWER 2020-21 Annual Report Analysis (Annual Result Update)

Oct 20, 2021 | Updated on Oct 20, 2021

Here's an analysis of the annual report of TATA POWER for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of TATA POWER. Also includes updates on the valuation of TATA POWER.

Power Grid's InvIT IPO: Key Points to Consider (Company Info)

Apr 23, 2021

In this article, we discuss the key reasons why the stock of Power Grid was in focus today.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

More Views on News

Most Popular

10 Indian Companies with the Fastest Growth in Dividend Payouts... (Views On News)

Jan 10, 2022

These companies have been consistently paying higher dividends for several years.

Tata Steel vs SAIL: Which Stock is Better? (Views On News)

Jan 13, 2022

With government initiatives set to boost the steel sector, find out who has a better chance of coming out on top.

Watch Out for these 4 Indian Companies Betting Big on EV Supply Chain (Views On News)

Jan 11, 2022

The upside in supply chain players could be huge but a delay in the transition to EVs, or any policy related hiccups could end the momentum.

Tech Mahindra's CTC Acquisition: Too Expensive? (Views On News)

Jan 18, 2022

Tech Mahindra's acquisition of European IT-company fails to excite investors.

Time to Buy Energy Stocks (Fast Profits Daily)

Jan 14, 2022

Energy is a sector that looks set to take off. It's time to get in.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

TATA POWER SHARE PRICE


Jan 21, 2022 (Close)

TRACK TATA POWER

  • Track your investment in TATA POWER with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

TATA POWER 8-QTR ANALYSIS

COMPARE TATA POWER WITH

MARKET STATS