Tata Power shares in correction mode; should you buy, sell or hold the stock?

Shares of Tata Power Company Ltd are in a downtrend in the short term. The Tata Group stock has fallen 25% from its 52 week high. Tata Power stock reached a 52-week high of Rs 494.85 on September 27, 2024. The stock is in a correction mode in the short term, falling   18% in three months and 15.60% in six months.  

In the current session, Tata Power shares slipped to a low of Rs 367.50 on BSE.It also hit a high of Rs 371.80. 

The stock is neither oversold nor overbought on charts, signals its relative strength index (RSI), which stands at 48. In terms of price action, the stock is trading higher than the 5 day, 10 day, 20 day, 30 day but lower than the 50 day, 100 day, 150 day and 200 day moving averages.

Tata Power stock is also down 6.18% in a year. However, Tata Power shares logged double digit returns of 77% in two years. In five years, the stock delivered multibagger returns of 538.35%. 

Kotak Equities has a sell call on the stock with a price target of Rs 330. 

"Tata Power’s pipeline of 5 GW of renewable assets, in addition to the external order book of Rs135 bn under Tata Power Solar, will likely drive headline growth hereon. Valuations at 20X P/E and 2.7X P/B on FY2026E remain rich, even as the earnings profile appears to be aided by regulatory one-offs; maintain our SELL rating with an unchanged SoTP-based fair value of Rs 330," said the brokerage. 

Motilal Oswal has a price target of Rs 490 post Q3 earnings. Tata Power's Q3 Ebitda came in 4 per cent below the brokerage's estimate but was up 38 per cent on a YoY basis.

"While 3QFY25 adjusted PAT was above our expectations, overall, we trim our FY26-27 EPS by 7 per cent/7 per cent, mainly due to a slower-than-expected pace of commissioning in the RE generation business. We reiterate our 'Buy' rating on the stock with a target price of Rs 490.

JM Financial has a buy call on the stock. It has trimmed price target to Rs 456 against the previous Rs 481. 

"With an estimate of company to report 2024-27 revenue/EBITDA CAGR of 9%/ 17%, we continue to maintain BUY, with a SOTP-based TP of INR 456 (+26% upside) implying 11.5x EV/EBITDA and 2.5x P/B on FY27. 

Nuvama has a reduce call on the stock with a target price of Rs 343.

"We stay optimistic on TPWR’s long-term RE transition (65% mix by FY28), solar manufacturing (50% external sales by FY27) and optionality of solar rooftops, nuclear and potential UP Discom acquisition. However, growth is back-ended and priced in; maintain ‘REDUCE’ with SotP-based TP of Rs 343 (implied B/V = 2.5x FY27E)," said Nuvama. 

Antique Broking has retained its 'Buy' call on the stock with a revised target rice of Rs 477 from Rs 513 earlier, factoring in 14 times EV/Ebitda valuation for renewable assets against 16 times ascribed earlier. 

"The stock trades at 2.4 times FY27E PBV (at a slight premium to +1 STD); the premium is for longevity of cash flow and capex laid out for growth. Catalyst for stock performance is timely commissioning of renewable capacity. Here, Tata Power plans to add 2-2.5 GW per annum -- solar EPC order inflow, further opportunities under pumped hydro, nuclear power plant (which is evolving)," Antique Stock Broking said.