Tata Power Share Price Target: 'Nuclear Reactor' Plans To Fuel Stock Price? JM Financial Report

JM Financial has a buy call for Tata Power with a target price of Rs 501, the current market price is Rs 401. The target price of Rs 501 is drawing attention to its strategic moves in nuclear energy, renewable power, and distribution, which could significantly enhance its stock performance. According to a recent report by JM Financial, Tata Power’s future growth is poised to benefit from these initiatives, driving its target price to Rs 501.

Renewable Energy and Captive Power Expansion
Tata Power is placing a strong emphasis on Renewable Energy – Round The Clock (RE-RTC) projects, targeting an attractive equity internal rate of return (IRR) of 17-18 per cent. This is part of the company's broader focus on meeting the increasing captive power requirement within the Tata Group, which is expected to reach a significant 10GW. Tata Power is ramping up its production capabilities in renewable energy, with its 4.3 GW cell and module manufacturing capacity set to be fully operational soon. Most of this capacity will be utilized for the captive needs of the Tata Group, further boosting Tata Power's revenue potential.

Nuclear Energy Ambitions: Small Modular Reactors
A key component of Tata Power's future growth strategy involves nuclear energy. The company is currently in talks with the Indian government to explore setting up Small Modular Reactors (SMRs), a move that could open up a new energy frontier. While there is no set timeline for the project, the Indian government is expected to announce significant developments in nuclear energy soon, with private sector involvement being encouraged. Tata Power, with its execution capabilities, is positioning itself to play a pivotal role in this space alongside the state-owned Nuclear Power Corporation of India (NPCIL), which brings the necessary technical expertise.

Preference for Distribution Over Transmission
Tata Power’s strategy also leans towards the distribution sector, where it sees higher returns compared to transmission. The company typically achieves an equity IRR of 15.5 per cent or more in distribution, along with potential gains from reducing Aggregate Technical and Commercial (AT&C) losses. In contrast, transmission is highly capital-intensive, and the competition in this segment drives equity IRR below 10 per cent. This shift towards distribution aligns with ongoing efforts by various Indian states to privatize distribution networks, presenting an attractive growth opportunity for Tata Power.

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