Tata Power shares recover 29% from 52-week low; can they hit Rs 300 mark?

Shares of Tata Power Ltd have recovered 29% from their 52-week low in four months. The stock, which hit a 52-week low of Rs 182.45 on March 28, 2023 closed at Rs 235.30 in the previous session, delivering 28.95% returns during the period. The four-month returns from the Tata Group stock have surpassed yearly and year-to-date returns of 1.23% and 13.29%, respectively.

On Thursday, the Tata Power stock ended flat at Rs 235.30 on BSE. The Tata Group stock opened higher at Rs 234.75 on BSE. Total 6.71 lakh shares of the firm changed hands amounting to a turnover of Rs 15.79 crore on BSE. Market cap of the firm stood at Rs 75,186 crore.

In terms of technicals, the relative strength index (RSI) of the stock stands at 62.1, signaling the stock is neither oversold nor overbought. Tata Power has a one-year beta of 1, indicating average volatility during the period. Tata Power shares are trading higher than 20 day, 50 day, 100 day, 200 day but lower than the 5-day moving averages.

The strong rally in the power stock since March-end started after an improvement in the outlook for Tata Power by rating agencies.

S&P Global Ratings upgraded its rating on Tata Power to 'BB+' with a stable outlook in April end this year. "S&P Global Ratings has upgraded its rating by one notch on the company to BB+ rating with a stable outlook from BB with a stable outlook," Tata Power said.

India Ratings rated Tata Power Company’s additional NCDs ‘IND AA’/Stable; and also affirmed other ratings on June 21.

On the same day, CRISIL Ratings assigned 'CRISIL AA/Stable' rating to the non-convertible debentures of Tata Power Company Limited (Tata Power) and reaffirmed its 'CRISIL AA/Stable/CRISIL A1+' ratings on the bank facilities and existing debt instruments.

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The Q4 earnings also fueled the rally in the stock. On May 5 this year, Tata Power logged a 48 per cent rise in its fourth quarter profit for the financial year 2022-23 (FY23). Net profit rose to Rs 939 crore in the last quarter against Rs 632 crore in the same period last year. The company said this would be the 14th consecutive quarter of profit after tax (PAT) growth, adding that the Q4 numbers were supported by strong performance across all businesses.

Revenue climbed 6 per cent to Rs 12,755 crore in Q4 FY23 against Rs 12,085 crore in Q4 FY22 due to higher sales across distribution companies and capacity addition in renewables.

The firm will announce its earnings for the quarter ended June on August 9, 2023.

Analysts are bullish and expect the stock to hit Rs 300 mark if the current rally continues.

Gaurav Bissa, VP, InCred Equities said, "Tata Power has been slowly and consistently inching higher in the last few months. The stock witnessed a recent breakout above Rs 230 levels which pushed it towards Rs 245-250 zone. However, the stock has witnessed profit booking after triggering bearish harmonic shark pattern which resulted in stock heading towards Rs 230 levels. The stock has an immediate support at Rs 230 which is also the breakout retest levels which is sustained can lead to a bounce to Rs 245 levels. Traders are advised to keep Rs 229 as their stoploss for existing positions and hold Rs 250 levels. A close above Rs 250 will trigger a fresh breakout for Rs 275 levels."

Vaibhav Kaushik, Research Analyst, GCL Broking said, “Tata Power has a strong support near Rs 219. On other hand, resistance is near Rs 280. So, buying on dips is advisable with a stop loss of Rs 218.”

Ravi Singh, Vice President and Head of Research, Share India said, “Tata Power is witnessing selling pressure taking cues from the overall weakness in the benchmark indices. However, the share price is expected to rise due to benefits of increase in power consumption in summer season. High power demand and rise in power prices would help companies like Tata Power in the maintaining strong gross margins. On the technical setup, the stock is showing strength on daily and weekly chart to touch the levels of Rs 240 in the coming trading sessions.”

Abhijeet from Tips2trades said, “Tata Power is bearish on the Daily charts with strong resistance at Rs 244.7. A daily close below support of Rs 232 could lead to target of Rs 217 in the near term."

Manoj Dalmia, CEO of Proficient Shares said, “Investors can accumulate Tata Power at current levels with a very small stop loss. Risk averse investors can buy once Rs 250 is crossed. After that, one can expect a long-term target of Rs 300 from current levels. The long-term prospects are strong as it’s actively foraying into EV infrastructure and other allied services. As the demand for power is growing, the ratio of power to GDP has increased from 0.94 times to 1.1 times. Renewable energy is the focus as 93% of capacity additions were pushed towards it. The cost pressures have also come down a bit compared to previous years allowing scope for increased margins.”