TATA Power Ltd - Investment Pick -Elliot Waves
Tata Power has broken the Parallel Channel in the Elliot Waves pattern along within Corrections.
Now the Script has broken the Channel and Moving Upside.
The time frame was analyzed is the Monthly time frame. So the this script is good for Investment Purpose as technically.
Fundamental Analysis:
Source: billiondollarvaluation.com/tata-power-fundamental-analysis-and-future-outlook/
//Quote//
Tata Power is an Indian electric utility company based in Mumbai and is part of the $ 100 billion Tata Group. The core business of the company is to generate, transmit and distribute electricity across the licensed areas. Tata Power, along with its subsidiaries and joint entities, is present across the entire power value chain of conventional and renewable energy and next-generation customer solutions.
The company’s shares have 52 weeks price band of INR 74-30 and a total market capitalization of INR 98 billion which makes it a Mid-Cap company. The shares have a P/E ratio of 15 and a dividend yield of 3.57%
1.Economic Moat (★ ★ ★ ★ ☆)
The company operates in the utility sector in which market dominance comes from Capacity, Distribution and Licencing. The industry is also asset-heavy and the profit margins get trimmed by depreciation and interest expenses. Tata Power is India’s largest Integrated Power company and has a base of 5+ million consumers in India. On the distribution front, the company has 3531+ cKm transmission network along with 1.95+ lakh smart meter installations.
The company has a total capacity of 12264+ MW out of which 30% is clean energy generation. The capacity break up is also such that 8805 MW is from Thermal power generation, 447 MW is through Hydropower, 375 MW is from Waste Heat, 932 MW is from Wind and 1705 MW is from Solar. Tata Power is also India’s #1 Solar rooftop EPC company since the last 7 years. The company is leading India’s transition of energy requirements away from fossil fuels towards renewable energy. Overall the company is well established in the renewable energy business and has a sustainable market share. This also gives a wide economic moat to the company. Therefore this category gets 4 stars in Tata Power fundamental analysis.
2. Business Model and Management (★ ★ ★ ★ ★)
The business model of the company is such that it operates across 7 main segments namely power generation through Thermal, Hydro, Waste heat recovery, Wind power and Solar energy. The other 2 verticals are Transmission and Electric Vehicle charging infrastructure and Home automation. Tata Power is establishing energy-efficient charging infrastructure to ensure India is EV-ready for the transition to green mobility. The company has till date opened 170+ EV charging points across 20+ cities in India.
The company is mainly focused on improving its renewable energy portfolio and has ventured on expansion across the wind and solar energy. Tata Power is maximising the utility of idle rooftop space by providing EPC solutions to residential, commercial/ industrial and institutional consumers across India. Overall the business model for the company is well-diversified and the focus is on the future of clean energy business.
3. Growth Ratios (★ ★ ★ ☆ ☆)
The revenue has seen a CAGR growth of 5.04% over the last 10 years. The operating and net income has also increased by 2.35% and 0.46% CAGR respectively during the same period. The working capital has been negative due to high payables and the Cap-Ex has also been stable over the years. This overall indicates a slow growth for the company considering the asset-heavy nature of the business. Therefore this category gets 3 stars in Tata Power fundamental analysis.
4. Profitability Ratios (★ ★ ★ ★ ☆)
The gross margin has declined significantly due to the higher expense in the thermal power generation business. The net income in such an industry is significantly eroded by the interest payments and depreciation. This overall has the trickle-down effect on other margins, but the other margins have seen recovery due to business diversification along with improved return on assets. Overall this indicates improving profitability for the company. Therefore this category gets 4 stars in Tata Power fundamental analysis.
5. Cash Flow Ratios (★ ★ ★ ☆ ☆)
The net income margin has improved slightly over the recent years and the Cap-Ex as a percentage of sales has remained stable. The free cash flow as a percentage of net income has been negative but stable over the years due to linear Cap-Ex incurred by the company. The operating and free cash flow growth rate has gone negative over the years. This overall indicates a weak cash flow position for the company. Therefore this category gets 3 stars in Tata Power fundamental analysis.
4 STAR INVESTMENT / EXCEL MODELS / FUNDAMENTAL ANALYSIS / INDIAN STOCK MARKETS / INVESTMENTS / MID CAP STOCKS / NSE AND BSE / UTILITIES SECTOR
Tata Power Fundamental Analysis and Future Outlook
by Aryan PatelJuly 20, 2020
TATA Power Fundamental Analysis and Future Outlook
Tata Power is an Indian electric utility company based in Mumbai and is part of the $ 100 billion Tata Group. The core business of the company is to generate, transmit and distribute electricity across the licensed areas. Tata Power, along with its subsidiaries and joint entities, is present across the entire power value chain of conventional and renewable energy and next-generation customer solutions.
The company’s shares have 52 weeks price band of INR 74-30 and a total market capitalization of INR 98 billion which makes it a Mid-Cap company. The shares have a P/E ratio of 15 and a dividend yield of 3.57%
Now, let’s take a deep dive into the fundamentals of the company.
The company will be evaluated on 10 categories and each would be given a rating out of 5 stars. From this, we will arrive at a combined stock rating for the company. As the ratings are based on long term past performance, they are relevant for at least 3 years in the future until FY 2022. The categories are as follows.
Economic Moat
Business Model and Management
Growth Ratios
Profitability Ratios
Cash Flow Ratios
Liquidity and Solvency Ratios
Efficiency Ratios
Valuation Ratios
ROE (Du Pont Analysis)
Future Prospects
(All units are INR Millions except ratios and per share data)
You can get the complete excel model used for this analysis from below:
1.Economic Moat (★ ★ ★ ★ ☆)
The company operates in the utility sector in which market dominance comes from Capacity, Distribution and Licencing. The industry is also asset-heavy and the profit margins get trimmed by depreciation and interest expenses. Tata Power is India’s largest Integrated Power company and has a base of 5+ million consumers in India. On the distribution front, the company has 3531+ cKm transmission network along with 1.95+ lakh smart meter installations.
The company has a total capacity of 12264+ MW out of which 30% is clean energy generation. The capacity break up is also such that 8805 MW is from Thermal power generation, 447 MW is through Hydropower, 375 MW is from Waste Heat, 932 MW is from Wind and 1705 MW is from Solar. Tata Power is also India’s #1 Solar rooftop EPC company since the last 7 years. The company is leading India’s transition of energy requirements away from fossil fuels towards renewable energy. Overall the company is well established in the renewable energy business and has a sustainable market share. This also gives a wide economic moat to the company. Therefore this category gets 4 stars in Tata Power fundamental analysis.
2. Business Model and Management (★ ★ ★ ★ ★)
The business model of the company is such that it operates across 7 main segments namely power generation through Thermal, Hydro, Waste heat recovery, Wind power and Solar energy. The other 2 verticals are Transmission and Electric Vehicle charging infrastructure and Home automation. Tata Power is establishing energy-efficient charging infrastructure to ensure India is EV-ready for the transition to green mobility. The company has till date opened 170+ EV charging points across 20+ cities in India.
The company is mainly focused on improving its renewable energy portfolio and has ventured on expansion across the wind and solar energy. Tata Power is maximising the utility of idle rooftop space by providing EPC solutions to residential, commercial/ industrial and institutional consumers across India. Overall the business model for the company is well-diversified and the focus is on the future of clean energy business.
Mr Praveer Sinha is the MD and CEO of Tata Power. He has over 3 decades of experience in the power sector and has been credited with transforming the power distribution sector and development and setting up of greenfield and brownfield power plants in India and abroad. Mr Natarajan Chandrasekaran is the Chairman of the board and also of the Tata Sons which is the holding company and promoter of more than 100 Tata operating companies with aggregate annual revenues of more than $100 billion. Overall the management is stable and reflects the values of the Tata group. Therefore this category gets 5 stars in Tata Power fundamental analysis.
TATA Power Fundamental Analysis and Future Outlook
3. Growth Ratios (★ ★ ★ ☆ ☆)
The revenue has seen a CAGR growth of 5.04% over the last 10 years. The operating and net income has also increased by 2.35% and 0.46% CAGR respectively during the same period. The working capital has been negative due to high payables and the Cap-Ex has also been stable over the years. This overall indicates a slow growth for the company considering the asset-heavy nature of the business. Therefore this category gets 3 stars in Tata Power fundamental analysis.
TATA Power Fundamental Analysis and Future Outlook
4. Profitability Ratios (★ ★ ★ ★ ☆)
The gross margin has declined significantly due to the higher expense in the thermal power generation business. The net income in such an industry is significantly eroded by the interest payments and depreciation. This overall has the trickle-down effect on other margins, but the other margins have seen recovery due to business diversification along with improved return on assets. Overall this indicates improving profitability for the company. Therefore this category gets 4 stars in Tata Power fundamental analysis.
5. Cash Flow Ratios (★ ★ ★ ☆ ☆)
The net income margin has improved slightly over the recent years and the Cap-Ex as a percentage of sales has remained stable. The free cash flow as a percentage of net income has been negative but stable over the years due to linear Cap-Ex incurred by the company. The operating and free cash flow growth rate has gone negative over the years. This overall indicates a weak cash flow position for the company. Therefore this category gets 3 stars in Tata Power fundamental analysis.
6.Liquidity and Solvency Ratios (★ ★ ★ ☆ ☆)
The company operates in asset-heavy industry and hence has significant debt in its capital structure. The financial leverage and debt to equity ratio have increased over the recent years due to expansion into other lines of business like Solar and EV charging. The current and quick ratios are also below the minimum threshold. Hence the company overall only has a moderate liquidity and solvency position. Therefore this category gets 3 stars in Tata Power fundamental analysis.
7. Efficiency Ratios (★ ★ ★ ★ ★)
The Inventory days have been stable over the years and the payables period has increased. The receivable days have increased slightly as the company expanded its distribution into new regions. The cash conversion cycle overall has improved significantly since FY 2016 and has gone negative 19 days. This overall indicates a good working capital and cash flow management by the company. Therefore this category gets 5 stars in Tata Power fundamental analysis.
8. Valuation Ratios (★ ★ ★ ★ ★)
The company has been trading at almost flat multiples over the years due to the nature of the industry like slow growth, asset intensity and lower profitability. However, the multiples can see a steady increase in the coming years due to the privatization of the public sector and the increasing focus on renewable energy. Thus the company has good revenue growth opportunities in the future. Therefore this category gets 5 stars in Tata Power fundamental analysis.
9. ROE 5 way Du Pont Analysis (★ ★ ★ ☆ ☆)
The leverage ratio is going up over the recent years due to the increase of debt in the capital structure. The asset turnover has almost remained flat and the tax efficiency has seen significant deterioration. The interest burden ratio has reduced and the operating margin has seen a small improvement over the years. The adjusted return on Equity overall has been almost zero due to negative tax efficiency. Therefore this category gets 3 stars in Tata Power fundamental analysis.
10. Future Prospects (★ ★ ★ ★ ★)
Some insights for the coming years from the analysis, management discussions and con calls are as follows.
a. Due to certain extraordinary expenses and revenue loss because of factory shutdowns in commercial areas, the Covid-19 outbreak will result in deterioration of the financial stability of the company. The company may reconsider its Cap-Ex or future growth plans to conserve cash for the uncertain times ahead.
b. Tata Power Green Energy has received a letter of award from Tata Power Mumbai distribution to develop a 225-megawatt hybrid renewable project. The energy will be supplied to Tata Power Mumbai Distribution under a power purchase agreement valid for a period of 25 years from scheduled commercial operation date. Read more here.
c. Tata Power’s total renewable energy capacity will increase to 3,782 MW out of which 2,637 MW is currently operational and 1,145 MW is under construction including 225 MW won recently.
d. Recently the Gujarat government withdrew a 2018 order that allowed private power producers to charge higher tariffs for their imported coal-based projects. This may have a short term profitability impact on all the major utility company in Gujarat including Tata Power and Torrent Power.
Overall the company has stable fundamentals along with good growth prospects and backing of the Tata business conglomerate. The management is also stable and focused on cleaner sources of energy. This may lead to a certain increase in valuation multiples for the company in the near future. Therefore this category gets 5 stars in Tata Power fundamental analysis.
he overall rating is arrived by taking the average of the above 10 category ratings and rounded up if it is above 0.5 and rounded down if it is below 0.5.
Overall Fundamental Rating:
TATA POWER SHARES (4.0/5)
Therefore it is a 4-star stock
★ ★ ★ ★ ☆
\\ Unquote\\
Disclaimer: Kindly do your own analysis before executing this trade.
Now the Script has broken the Channel and Moving Upside.
The time frame was analyzed is the Monthly time frame. So the this script is good for Investment Purpose as technically.
Fundamental Analysis:
Source: billiondollarvaluation.com/tata-power-fundamental-analysis-and-future-outlook/
//Quote//
Tata Power is an Indian electric utility company based in Mumbai and is part of the $ 100 billion Tata Group. The core business of the company is to generate, transmit and distribute electricity across the licensed areas. Tata Power, along with its subsidiaries and joint entities, is present across the entire power value chain of conventional and renewable energy and next-generation customer solutions.
The company’s shares have 52 weeks price band of INR 74-30 and a total market capitalization of INR 98 billion which makes it a Mid-Cap company. The shares have a P/E ratio of 15 and a dividend yield of 3.57%
1.Economic Moat (★ ★ ★ ★ ☆)
The company operates in the utility sector in which market dominance comes from Capacity, Distribution and Licencing. The industry is also asset-heavy and the profit margins get trimmed by depreciation and interest expenses. Tata Power is India’s largest Integrated Power company and has a base of 5+ million consumers in India. On the distribution front, the company has 3531+ cKm transmission network along with 1.95+ lakh smart meter installations.
The company has a total capacity of 12264+ MW out of which 30% is clean energy generation. The capacity break up is also such that 8805 MW is from Thermal power generation, 447 MW is through Hydropower, 375 MW is from Waste Heat, 932 MW is from Wind and 1705 MW is from Solar. Tata Power is also India’s #1 Solar rooftop EPC company since the last 7 years. The company is leading India’s transition of energy requirements away from fossil fuels towards renewable energy. Overall the company is well established in the renewable energy business and has a sustainable market share. This also gives a wide economic moat to the company. Therefore this category gets 4 stars in Tata Power fundamental analysis.
2. Business Model and Management (★ ★ ★ ★ ★)
The business model of the company is such that it operates across 7 main segments namely power generation through Thermal, Hydro, Waste heat recovery, Wind power and Solar energy. The other 2 verticals are Transmission and Electric Vehicle charging infrastructure and Home automation. Tata Power is establishing energy-efficient charging infrastructure to ensure India is EV-ready for the transition to green mobility. The company has till date opened 170+ EV charging points across 20+ cities in India.
The company is mainly focused on improving its renewable energy portfolio and has ventured on expansion across the wind and solar energy. Tata Power is maximising the utility of idle rooftop space by providing EPC solutions to residential, commercial/ industrial and institutional consumers across India. Overall the business model for the company is well-diversified and the focus is on the future of clean energy business.
3. Growth Ratios (★ ★ ★ ☆ ☆)
The revenue has seen a CAGR growth of 5.04% over the last 10 years. The operating and net income has also increased by 2.35% and 0.46% CAGR respectively during the same period. The working capital has been negative due to high payables and the Cap-Ex has also been stable over the years. This overall indicates a slow growth for the company considering the asset-heavy nature of the business. Therefore this category gets 3 stars in Tata Power fundamental analysis.
4. Profitability Ratios (★ ★ ★ ★ ☆)
The gross margin has declined significantly due to the higher expense in the thermal power generation business. The net income in such an industry is significantly eroded by the interest payments and depreciation. This overall has the trickle-down effect on other margins, but the other margins have seen recovery due to business diversification along with improved return on assets. Overall this indicates improving profitability for the company. Therefore this category gets 4 stars in Tata Power fundamental analysis.
5. Cash Flow Ratios (★ ★ ★ ☆ ☆)
The net income margin has improved slightly over the recent years and the Cap-Ex as a percentage of sales has remained stable. The free cash flow as a percentage of net income has been negative but stable over the years due to linear Cap-Ex incurred by the company. The operating and free cash flow growth rate has gone negative over the years. This overall indicates a weak cash flow position for the company. Therefore this category gets 3 stars in Tata Power fundamental analysis.
4 STAR INVESTMENT / EXCEL MODELS / FUNDAMENTAL ANALYSIS / INDIAN STOCK MARKETS / INVESTMENTS / MID CAP STOCKS / NSE AND BSE / UTILITIES SECTOR
Tata Power Fundamental Analysis and Future Outlook
by Aryan PatelJuly 20, 2020
TATA Power Fundamental Analysis and Future Outlook
Tata Power is an Indian electric utility company based in Mumbai and is part of the $ 100 billion Tata Group. The core business of the company is to generate, transmit and distribute electricity across the licensed areas. Tata Power, along with its subsidiaries and joint entities, is present across the entire power value chain of conventional and renewable energy and next-generation customer solutions.
The company’s shares have 52 weeks price band of INR 74-30 and a total market capitalization of INR 98 billion which makes it a Mid-Cap company. The shares have a P/E ratio of 15 and a dividend yield of 3.57%
Now, let’s take a deep dive into the fundamentals of the company.
The company will be evaluated on 10 categories and each would be given a rating out of 5 stars. From this, we will arrive at a combined stock rating for the company. As the ratings are based on long term past performance, they are relevant for at least 3 years in the future until FY 2022. The categories are as follows.
Economic Moat
Business Model and Management
Growth Ratios
Profitability Ratios
Cash Flow Ratios
Liquidity and Solvency Ratios
Efficiency Ratios
Valuation Ratios
ROE (Du Pont Analysis)
Future Prospects
(All units are INR Millions except ratios and per share data)
You can get the complete excel model used for this analysis from below:
1.Economic Moat (★ ★ ★ ★ ☆)
The company operates in the utility sector in which market dominance comes from Capacity, Distribution and Licencing. The industry is also asset-heavy and the profit margins get trimmed by depreciation and interest expenses. Tata Power is India’s largest Integrated Power company and has a base of 5+ million consumers in India. On the distribution front, the company has 3531+ cKm transmission network along with 1.95+ lakh smart meter installations.
The company has a total capacity of 12264+ MW out of which 30% is clean energy generation. The capacity break up is also such that 8805 MW is from Thermal power generation, 447 MW is through Hydropower, 375 MW is from Waste Heat, 932 MW is from Wind and 1705 MW is from Solar. Tata Power is also India’s #1 Solar rooftop EPC company since the last 7 years. The company is leading India’s transition of energy requirements away from fossil fuels towards renewable energy. Overall the company is well established in the renewable energy business and has a sustainable market share. This also gives a wide economic moat to the company. Therefore this category gets 4 stars in Tata Power fundamental analysis.
2. Business Model and Management (★ ★ ★ ★ ★)
The business model of the company is such that it operates across 7 main segments namely power generation through Thermal, Hydro, Waste heat recovery, Wind power and Solar energy. The other 2 verticals are Transmission and Electric Vehicle charging infrastructure and Home automation. Tata Power is establishing energy-efficient charging infrastructure to ensure India is EV-ready for the transition to green mobility. The company has till date opened 170+ EV charging points across 20+ cities in India.
The company is mainly focused on improving its renewable energy portfolio and has ventured on expansion across the wind and solar energy. Tata Power is maximising the utility of idle rooftop space by providing EPC solutions to residential, commercial/ industrial and institutional consumers across India. Overall the business model for the company is well-diversified and the focus is on the future of clean energy business.
Mr Praveer Sinha is the MD and CEO of Tata Power. He has over 3 decades of experience in the power sector and has been credited with transforming the power distribution sector and development and setting up of greenfield and brownfield power plants in India and abroad. Mr Natarajan Chandrasekaran is the Chairman of the board and also of the Tata Sons which is the holding company and promoter of more than 100 Tata operating companies with aggregate annual revenues of more than $100 billion. Overall the management is stable and reflects the values of the Tata group. Therefore this category gets 5 stars in Tata Power fundamental analysis.
TATA Power Fundamental Analysis and Future Outlook
3. Growth Ratios (★ ★ ★ ☆ ☆)
The revenue has seen a CAGR growth of 5.04% over the last 10 years. The operating and net income has also increased by 2.35% and 0.46% CAGR respectively during the same period. The working capital has been negative due to high payables and the Cap-Ex has also been stable over the years. This overall indicates a slow growth for the company considering the asset-heavy nature of the business. Therefore this category gets 3 stars in Tata Power fundamental analysis.
TATA Power Fundamental Analysis and Future Outlook
4. Profitability Ratios (★ ★ ★ ★ ☆)
The gross margin has declined significantly due to the higher expense in the thermal power generation business. The net income in such an industry is significantly eroded by the interest payments and depreciation. This overall has the trickle-down effect on other margins, but the other margins have seen recovery due to business diversification along with improved return on assets. Overall this indicates improving profitability for the company. Therefore this category gets 4 stars in Tata Power fundamental analysis.
5. Cash Flow Ratios (★ ★ ★ ☆ ☆)
The net income margin has improved slightly over the recent years and the Cap-Ex as a percentage of sales has remained stable. The free cash flow as a percentage of net income has been negative but stable over the years due to linear Cap-Ex incurred by the company. The operating and free cash flow growth rate has gone negative over the years. This overall indicates a weak cash flow position for the company. Therefore this category gets 3 stars in Tata Power fundamental analysis.
6.Liquidity and Solvency Ratios (★ ★ ★ ☆ ☆)
The company operates in asset-heavy industry and hence has significant debt in its capital structure. The financial leverage and debt to equity ratio have increased over the recent years due to expansion into other lines of business like Solar and EV charging. The current and quick ratios are also below the minimum threshold. Hence the company overall only has a moderate liquidity and solvency position. Therefore this category gets 3 stars in Tata Power fundamental analysis.
7. Efficiency Ratios (★ ★ ★ ★ ★)
The Inventory days have been stable over the years and the payables period has increased. The receivable days have increased slightly as the company expanded its distribution into new regions. The cash conversion cycle overall has improved significantly since FY 2016 and has gone negative 19 days. This overall indicates a good working capital and cash flow management by the company. Therefore this category gets 5 stars in Tata Power fundamental analysis.
8. Valuation Ratios (★ ★ ★ ★ ★)
The company has been trading at almost flat multiples over the years due to the nature of the industry like slow growth, asset intensity and lower profitability. However, the multiples can see a steady increase in the coming years due to the privatization of the public sector and the increasing focus on renewable energy. Thus the company has good revenue growth opportunities in the future. Therefore this category gets 5 stars in Tata Power fundamental analysis.
9. ROE 5 way Du Pont Analysis (★ ★ ★ ☆ ☆)
The leverage ratio is going up over the recent years due to the increase of debt in the capital structure. The asset turnover has almost remained flat and the tax efficiency has seen significant deterioration. The interest burden ratio has reduced and the operating margin has seen a small improvement over the years. The adjusted return on Equity overall has been almost zero due to negative tax efficiency. Therefore this category gets 3 stars in Tata Power fundamental analysis.
10. Future Prospects (★ ★ ★ ★ ★)
Some insights for the coming years from the analysis, management discussions and con calls are as follows.
a. Due to certain extraordinary expenses and revenue loss because of factory shutdowns in commercial areas, the Covid-19 outbreak will result in deterioration of the financial stability of the company. The company may reconsider its Cap-Ex or future growth plans to conserve cash for the uncertain times ahead.
b. Tata Power Green Energy has received a letter of award from Tata Power Mumbai distribution to develop a 225-megawatt hybrid renewable project. The energy will be supplied to Tata Power Mumbai Distribution under a power purchase agreement valid for a period of 25 years from scheduled commercial operation date. Read more here.
c. Tata Power’s total renewable energy capacity will increase to 3,782 MW out of which 2,637 MW is currently operational and 1,145 MW is under construction including 225 MW won recently.
d. Recently the Gujarat government withdrew a 2018 order that allowed private power producers to charge higher tariffs for their imported coal-based projects. This may have a short term profitability impact on all the major utility company in Gujarat including Tata Power and Torrent Power.
Overall the company has stable fundamentals along with good growth prospects and backing of the Tata business conglomerate. The management is also stable and focused on cleaner sources of energy. This may lead to a certain increase in valuation multiples for the company in the near future. Therefore this category gets 5 stars in Tata Power fundamental analysis.
he overall rating is arrived by taking the average of the above 10 category ratings and rounded up if it is above 0.5 and rounded down if it is below 0.5.
Overall Fundamental Rating:
TATA POWER SHARES (4.0/5)
Therefore it is a 4-star stock
★ ★ ★ ★ ☆
\\ Unquote\\
Disclaimer: Kindly do your own analysis before executing this trade.
Disclaimer
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