Tata Power shares hit record high post rating upgrade; check short and long-term price targets

Shares of Tata Power Co Ltd hit a record high today after India Ratings and Research upgraded the rating of the Tata Group firm's long-term issuer rating from 'IND AA' to 'IND AA plus', and maintained the stable outlook. The Tata Group stock rose 2.68% to a high of Rs 366.55 today against the previous close of Rs 356.95 on BSE. On the other hand, Tata Power stock fell to a 52 week low of Rs 182.45 on March 28, 2023.

Tata Power stock has gained 80.25% in a year and zoomed 65.55% in six months. Total 14.93 lakh shares of the firm changed hands amounting to a high turnover of Rs 54 crore on BSE. Market cap of Tata Power rose to Rs 1.16 lakh crore.

IIFL Securities has upgraded Tata Power to 'Add'.

"Tata Power stands out with its diversification strategy. We assume extension of section 11 for Tata Mundra until FY26, for which earnings move up by 32-45% on unchanged coal prices," says the report. Tata Power is also benefited on two fronts: 1) likely pick up in power demand benefiting some of the IPPs which have unfavourable economics; 2) improvement in consumption plus lower AT&C losses leading to superior earnings in the distribution segment," said IIFL Securities.

By the end of this month, the stock is likely to hit a target of Rs 385. One can fix a stop loss of Rs 342, said ICICIDirect Research.The brokerage said price has resumed uptrend post shallow retracement above 20 days exponential moving average (EMA). This signals that elevated buying demand emerged.

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.

Antique Broking has raised its target price for Tata Power to Rs 450 from Rs 422 earlier.

Antique said Tata Power was eyeing 12 GW in pumped hydro in Western India, where the land bank is in excess of 36,000 acre. Pumped hydro storage projects (PSPs) are established or proven models, costing less than Li-ion batteries, it said. Tata Power is working on 1 GW Bhivpuri PSP (6 GWh), which will cost Rs 4,700 crore, which is at the lower end of the cost curve.

The stock has seen very less volatility in a year with a beta of 0.5. In terms of technicals, the relative strength index (RSI) of the stock stands at 67.3, signaling the stock is trading neither in the overbought nor in the oversold zone. Tata Power shares are trading higher than the 5 day, 20 day, 30 day, 50 day, 100 day, 200 day moving averages.

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".

Disclaimer: Business Today provides stock market news for informational purposes only and that should not be construed as an investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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