Tata Power solar manufacturing and coal strength drive 1QFY27 earnings beat

Investment View and 1QFY27 Summary

Motilal Oswal Financial Services Limited (MOFSL) maintained its Buy view on Tata Power in its July 28, 2026 1QFY27 result update, arguing that strong earnings momentum should continue. The positive view follows an above-estimate quarter led by solar cell and module manufacturing and Indonesian coal mining.

At the report's CMP of Rs 371, MOFSL's sum-of-the-parts target price of Rs 454 implied 22 per cent upside.

Quarterly Financial Performance

Tata Power reported consolidated 1QFY27 revenue of Rs 19,050 crore, up 6 per cent year on year and 28 per cent quarter on quarter, which was 4 per cent above MOFSL's estimate. EBITDA of Rs 4,010 crore was down 3 per cent year on year but up 54 per cent quarter on quarter, and was 6 per cent above the broker estimate. Adjusted PAT was Rs 1,180 crore, up 11 per cent year on year and 10 per cent quarter on quarter, beating MOFSL's estimate by 9 per cent. EBITDA margin was 21.1 per cent versus 22.9 per cent in 1QFY26.

Solar Manufacturing and Segment Drivers

The key earnings driver was Tata Power's solar cell and module manufacturing business, where revenue reached Rs 2,460 crore and EBITDA Rs 620 crore, rising 53 per cent and 113 per cent year on year, respectively. Better realisations and external sales supported the performance: more than 63 per cent of modules and 50 per cent of cells were sold to third parties.

Module production was 1.0 GW, up 5 per cent year on year, while cell production was 0.9 GW, down 4 per cent. Share of profit from associates and joint ventures rose 86 per cent year on year to Rs 240 crore, led by Indonesian coal mining.

In contrast, solar EPC and rooftop revenue and EBITDA fell 22 per cent and 48 per cent year on year to Rs 1,700 crore and Rs 140 crore, respectively, due to lower third-party EPC billing. Mundra, coal and shipping EBITDA also declined, although higher coal profit improved PAT.

Renewable Expansion and Rooftop Solar Outlook

Management reiterated renewable commissioning guidance of 2.5-2.7 GW for FY27. About 0.2 GW was commissioned in 1QFY27, with management attributing the delay largely to transmission-connectivity constraints and expecting a sharper commissioning ramp-up from 2QFY27 after progress on land acquisition and connectivity. Operational capacity was about 16.8 GW at quarter-end.

Tata Power's rooftop installations increased 37 per cent year on year to 371 MWp. Management expects 60-70 per cent rooftop growth in FY27, aims to lift market share from 12-13 per cent to about 25 per cent over the medium term, and expects the Rs 3,000 crore rooftop revenue target to be achieved by 2029, ahead of the earlier 2030 target.

The rooftop order book was Rs 630 crore, while battery energy storage system (BESS) solutions for commercial and industrial customers are expected to improve the offering.

Transmission and Pumped-Storage Catalysts

Transmission projects remain a further catalyst. Management said the Khurja line was close to commercial operation and the Bikaner line was expected by October 2026. Tata Power plans to invest Rs 10,000 crore in the Mumbai transmission network over five years under the regulated model.

The 1 GW Bhivpuri pumped-storage project remains targeted for CY29 commissioning; one 330 MW unit has secured a SECI bid and discussions continue for the remaining capacity. Management also expects construction of the 1,800 MW pumped-storage project to begin in late CY26.

Key Monitorables, Capex and Forecasts

Key monitorables identified by MOFSL include renewable commissioning execution, pending Mundra supplementary power-purchase agreement approvals from four states, and capex delivery.

Tata Power incurred Rs 5,300 crore capex in 1QFY27, with 40-45 per cent directed to renewables. Management retained FY27 capex guidance of Rs 25,000 crore, around half for renewable projects, and expects 2QFY27 capex above Rs 6,000 crore.

Net debt to underlying EBITDA was 3.41 times and net debt to equity was 1.25 times. MOFSL forecasts FY27E sales of Rs 78,090 crore, EBITDA of Rs 17,140 crore and adjusted PAT of Rs 4,940 crore, followed by FY28E adjusted PAT of Rs 6,420 crore.

Sum-of-the-Parts Valuation

MOFSL values Tata Power through a sum-of-the-parts framework, producing a target price of Rs 454 per share.