HSBC has upgraded its rating for Tata Power to ‘hold’ from ‘reduce.’ It has also hiked the target price by Rs 45 as it was raised to Rs 345 from Rs 300.
The upgrade comes on the back of improving execution of the company. This is even more significant as there are weak macro cues at this point of time in the economy. The brokerage notes that the stock correction came from external factors that were outside the control of the company.
These above mentioned external issues include issues like the demand for power falling dull. This has had a direct impact on growth projections. Further, there was significant delay in power purchase agreement signing along with delays in the privatisation of state-owned companies, according to the brokerage.
Environment approvals have also delayed various projects. HSBC on the other hand also notes that there are segments of the company like the solar module and cell manufacturing that are seeing a good amount of ramp-up.
The brokerage also cites a solid turnaround in the Engineering, Procurement, and Construction segment. It also notes that the renewable power commissioning needs to accelerate its execution to better efficiency.
The brokerage does not see any material positive catalysts in the medium term. The power demand is expected to remain weak in May as well, while the privatisation of discoms is also set to see more delays.
There are new thermal power plants that are commissioned that may reduce dependency on other plants.
The key risk highlighted by the brokerage is that there are government approvals involved along with competitive intensity from peers.
. Read more on Business by NDTV Profit.The upgrade is on the back of project progress and growing segments, despite the lack of strong positive cues. Read MoreBusiness, Markets
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