Shares of Tata Power Company Ltd. surged to an all-time high on Friday after global brokerage firm Morgan Stanley double-upgraded the stock in its recent note. The brokerage now has a ‘Overweight’ rating on the Tata Group cement company, compared to its earlier rating of ‘Underweight’.

Morgan Stanley has a price target of ₹577 per share on Tata Power, implying a potential upside of 23% from the current market levels.

The brokerage noted that Tata Power has a strong mix of cash-generating regulated businesses, which provide assured returns, and market-linked ventures such as its green platform, transmission, and pumped hydro.

Steady cash flow from the regulated businesses can be reinvested into the growing market-linked segments.

The company offers earnings growth with reasonable ROCE (excluding Mundra) and controlled leverage.

Morgan Stanley indicated that the company’s performance is largely in-line with Street estimates, with the stock having underperformed the Nifty by 3 percentage points over the past six months.

The quality of the projected growth is superior, driven by the green platform compared to its past performance.

The contribution of green businesses to Tata Power’s profits is expected to rise sharply, fueled by a near doubling of renewable energy capacity, the solar EPC business, external module and cell sales, and solar rooftop installations.

The company boasts a well-managed balance sheet and stable regulated business, enabling it to accelerate investments in transmission, utility-scale renewable energy projects, and pumped storage.

Compared to most utility peers, the brokerage believes that Tata Power possesses competitive advantages in establishing pumped storage projects (PSP). Given its access to numerous hydro assets, the time required for regulatory approvals is likely to be reduced, as Resettlement and Rehabilitation (R&R) will not be an issue and environmental approvals are already in place for existing hydro assets. This should lead to faster commissioning and potentially better returns compared to peers.

Shares of Tata Power are currently trading 1.64% higher at ₹483.85. At this price, the scrip has gained about 47% on a year-to-date (YTD) basis.