Tata Power shares delivered multibagger returns in three years; here are the price targets for this year

Shares of Tata Power Co Ltd have delivered multibagger returns in the last three years. The stock zoomed 327% against a 50% rise in Sensex during the period. In the last six months, the stock surged 49%, taking away the defensive tag from the Tata Group stock. Tata Power stock was trading on a flat note in the second session of this year today. It stood at Rs 330.85 against the previous close of Rs 329.95 on BSE. Tata Power stock hit a 52 week high of Rs 346.90 on December 20, 2023 and a 52 week low of Rs 182.45 on March 28, 2023.

Kotak Institutional Equities has a sell call on the stock with fair valuation of Rs 245 per share.

“Tata Power currently trades at 31X trailing earnings of FY2023. Even if the company were to achieve its stated target of doubling profits in the next four years, it is trading at 15X P/E (FY2027)–a marked premium to current trading multiples for government-owned regulated entities. Accordingly, valuations are assuming perfect execution and more, while leaving no margin for error. Mundra has still not found a permanent resolution and depends on the government’s time-bound Sec 11 orders—a benefit it enjoys only until June 2024. SELL with revised fair valuation of Rs 245 per share, as we roll forward to September 2025 (from Rs 230 per share),” said the brokerage.

The Tata Group stock has gained 56% in a year. The stock has seen very less volatility in a year with a beta of 0.3.

In terms of technicals, the relative strength index (RSI) of the stock stands at 65.7, signaling the stock is neither overbought nor oversold on technical charts. Tata Power shares are trading higher than the 5 day, 20 day, 30 day, 50 day, 100 day, 200 day moving averages.

Total 8.04 lakh shares of the firm changed hands amounting to a turnover of Rs 26.34 crore on BSE. Market cap of Tata Power rose to Rs 1.05 lakh crore.

Tata Power reported a 8.79% year-on-year (YoY) growth in its consolidated net profit for the July-September 2023 quarter to Rs 1,017.41 crore against a net profit of Rs 935.18 crore in the year-ago period Revenue for the period under review rose 9% to Rs 15,442 crore.

The company attributed its growth in revenue and profits to its “healthy balance sheet, operational excellence, and synergies across all business clusters".

Shiju Koothupalakkal - Technical Research Analyst, Prabhudas Lilladher expects the stock to hit Rs 380 mark if it decisively breaches the Rs 335 level.

"The stock has witnessed a decent rally in the last 2 months gaining from Rs 230 zone to scale the high level of Rs 335 zone where it is showing some resistance with the indicators racing to their highly overbought zone and with slight consolidation seen one can expect for some cooling off in the coming days. Further ahead, the stock can carry on with the momentum once a decisive breach above Rs 335 level is confirmed and expect for next targets of Rs 358 and Rs 380 levels. The near-term support is near Rs 318 levels and one can expect for further upward movement with bias maintained strong. Only a decisive breach below Rs 305 zone shall weaken the bias to some extent, " said Koothupalakkal.

Mandar Bhojane, Equity Research Analyst at Choice Broking said, “Tata Power has formed a rounding bottom pattern breakout with significant volume. This pattern suggests a robust bullish momentum in the stock. Moreover, the stock is positioned above key Exponential Moving Averages (EMAs), including the 20-day, 50-day, 100-day, and 200-day EMAs. This alignment above crucial EMAs strengthens the bullish outlook, indicating the potential for sustained upward price movement. Additionally, the Stochastic Relative Strength Index (Stoch RSI) has exhibited a positive crossover from the oversold region, further contributing to the bullish sentiment. The convergence of these technical indicators suggests that the stock may have the potential to reach a target price of Rs 420 in the near term. To manage risk effectively, it is recommended to implement a stop-loss (SL) at Rs 260.”

Brokerage Sharekhan expects the stock to hit the Rs 390 mark.

"The power sector is expected to grow strongly on peak power demand-supply shortfall over for next few years; government has set ambitious target of 80 GW of new thermal power and 321 GW of new renewable power (RE) capacities by 2031-32. Tata Power plans to install 1.5-2 GW of renewable energy every year with a target to increase its renewable power portfolio to 70% of total portfolio by 2030. The company has set an aggressive growth target for next 3 years with Revenue/EBITDA/PAT expected to double by FY27 with 90% of PAT coming from core business (versus 40% in FY23) by FY27E," said the brokerage.

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