Morgan Stanley (NYSE:MS) made a significant adjustment to its stance on Tata Power (NS:TTPW) Co Ltd (TPWR:IN), elevating the company's stock from Underweight to Overweight. Accompanying this upgrade, the firm also increased the price target for Tata Power shares to INR577.00, up from the previous target of INR331.00.
The analyst at Morgan Stanley cited a compelling combination of Tata Power's stable, regulated businesses that guarantee returns and its market-linked ventures, such as the green platform, transmission, and pumped hydro projects. This diversified business model is believed to provide a pathway to earnings growth while maintaining a reasonable return on capital employed (ROCE), excluding the Mundra project, and keeping leverage under control.
The analyst's assessment indicates that, although their projections are consistent with the general market consensus, Tata Power's stock performance has trailed behind the Nifty index by three percentage points over the last six months. Despite this underperformance, Morgan Stanley recognizes the quality of Tata Power's anticipated growth, especially highlighting the contributions from its green platform as opposed to its historical performance.
The upgrade reflects Morgan Stanley's confidence in Tata Power's strategic direction, especially in the context of the company's green energy initiatives. Tata Power's focus on renewable energy and its portfolio of regulated businesses are seen as key drivers for the company's future growth and financial stability.
With the new price target set at INR577.00, Morgan Stanley has signaled its expectation for Tata Power's share value to increase substantially. This new target represents a significant uplift from the previous valuation and suggests a positive outlook for the company's financial prospects.
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