Goldman Sachs has retained its ‘Sell' rating on Tata Power, arguing that the stock's risk-reward profile remains unfavourable despite a marginal increase in its price target.
Analysts Nikhil Bhandari and Nirmal Gopi raised Tata Power's 12-month target price to Rs 305 from Rs 300, implying a downside of 13.5% from the current market price of Rs 352.45.
The brokerage revised its FY27-FY29 earnings per share (EPS) estimates by -5% to +9% while incorporating updated assumptions for the renewable energy business and valuations for Tata Power's emerging pumped storage power (PSP) and tariff-based competitive bidding (TBCB) businesses.
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However, Goldman Sachs believes the stock's valuations remain unattractive at 23 times estimated FY28 earnings and 12 times FY28 enterprise value to EBITDA. Its refreshed scenario analysis points to around 14% upside in a bull case against 33% downside in a bear case.
Why Goldman Sachs Remains Bearish On Tata Power
Tata Power has drawn investor attention on expectations of an earnings recovery in FY27, supported by the resumption of operations at Mundra, higher coal mining earnings and continued expansion of its solar rooftop business.
Goldman Sachs, however, expects profit growth to moderate after FY27. It forecasts profit after tax growth of 18% in FY27, easing to around 15% CAGR over FY27–FY30.
The brokerage expects margins in upstream solar manufacturing to normalise as cell shortages potentially ease and competition intensifies in rooftop solar. Growth in regulated assets, TBCB and PSP businesses could partly offset these pressures.
Tata Power Target Price Raised
Goldman Sachs raised its 12-month target price to Rs 305 from Rs 300 as it rolled forward its valuation to FY28 estimates, updated its renewable energy modelling and valuation methodology, and incorporated value for the emerging PSP and TBCB businesses.
Despite these changes, the brokerage said Tata Power's valuation remains uncompelling. Its 12-month forward EV/EBITDA multiple is near the upper end of its historical trading range, limiting the stock's appeal at current levels.
Goldman Sachs said it sees better risk-reward opportunities elsewhere in the sector and highlighted NTPC and Power Grid Corporation of India as stocks on which it has Buy ratings.
Goldman Sachs Revises Tata Power Earnings Estimates
Goldman Sachs revised its earnings forecasts across FY27–FY29, with changes reflecting updated business assumptions.
For FY27, the brokerage lowered its EPS estimate to Rs 13.80 from Rs 14.55. For FY28, it cut its estimate to Rs 15.09 from Rs 15.86, while its FY29 EPS estimate increased to Rs 18.46 from Rs 16.90.
The revisions reflect a mixed earnings outlook, with near-term pressures balanced by contributions from emerging businesses and the longer-term expansion of regulated assets.
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