Tata Power and JSW Energy: Is It Time to Buy These Two Power Stocks?

The domestic power sector is poised for robust growth in the coming years, fuelled by strong energy demand and significant opportunities from the transition from grey to green energy, according to a recent note from foreign brokerage Nomura India. They have initiated coverage on Tata Power Company Ltd and JSW Energy Ltd with 'Buy' ratings, projecting that India's energy demand growth will surpass previous levels over the next five years, creating substantial value-creation opportunities.

The brokerage emphasises that describing the growth potential in the power sector as a "long runway" would be an understatement. For Tata Power, Nomura forecasts a 16% compound annual growth rate (CAGR) in EBITDA from FY24 to FY27, driven by a twofold increase in renewable energy (RE) capacity, strong execution of a Rs 15,700 crore solar EPC order book, and improved profitability from its Odisha operations. Meanwhile, JSW Energy is expected to achieve a remarkable 38% CAGR during the same period, supported by a doubling of operational capacity and healthy margins from RE generation projects.

Tata Power Share Price Target

Nomura India has set a target price of Rs 560 for Tata Power, citing a robust outlook as the company aims to achieve significant EBITDA CAGR from FY24 to FY27 by increasing its RE capacity to 10 GW by FY27. Tata Power is expected to perform well in its EPC business, bolstered by a growing order book of Rs 15,700 crore. The company is also scaling up its newly commissioned 4.3 GW cell-to-module facility. Furthermore, Nomura anticipates a notable increase in profitability for Tata Power’s Odisha DISCOM business, noting that the company is well-positioned to benefit from potential DISCOM reforms due to its competitive advantage in the regions it operates.

"Additional upside may arise from the potential realisation of MoUs with the Rajasthan government in the coming years," the report added.

JSW Energy Share Price Target

For JSW Energy, the brokerage has suggested a target price of Rs 885, based on 15 times the December 2026 EV/EBITDA ratio. This projection is supported by a strong outlook, with an expected 38% EBITDA CAGR from FY24 to FY27, driven by the company's plans to double its RE-generating capacity by FY27 and achieve its 20 GW target ahead of the 2030 calendar year.

Nomura highlighted that JSW Energy offers significant earnings visibility, as 92% of its capacity is secured under long-term power purchase agreements (PPAs). The company is also expected to benefit from major wins in upcoming RE tenders with attractive tariffs that deliver mid-teen internal rates of return (IRRs), along with potential upsides from higher utilisation rates.