Tata Power shares trading at seven-month high; buy, sell or hold?

Shares of Tata Power Ltd are trading at a seven-month high easing concerns of investors who intend to book profit on the counter of the Tata Group stock. In fact, the stock has surged over 23 per cent since March 28 this year, surpassing yearly and year-to-date returns of 2.15% and 8.57%, respectively. The stock closed at Rs 225.05 on December 8 last year, a level which the Tata Power stock reclaimed after seven months. Similarly, the Tata Power stock closed at Rs 183.95 on March 28 this year and rallied 23.36% in the next 3.5  months on BSE.  

The rally since March-end this year can be attributed to an improvement in the outlook for Tata Power by rating agencies.

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In April-end, S&P Global Ratings upgraded its rating on Tata Power to 'BB+' with a stable outlook. "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.   

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

On the same day, CRISIL Ratings assigned its '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 fuelled the rally in the stock. On May 5 this year, Tata Power reported 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.  

In the current session, the Tata Power stock was trading flat at Rs 226.10 on BSE. The Tata Group stock opened higher at Rs 226 against the previous close of Rs 225.40 on BSE.     

 Stock of Tata Power has gained 2.05% in a year and risen 6.73% in 2023. Total 2.15 lakh shares of the firm changed hands amounting to a turnover of Rs 4.86 crore on BSE. Market cap of the firm rose to Rs 72,246 crore.    

 In terms of technicals, the relative strength index (RSI) of the stock stands at 59.6, 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 the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.      

 Here’s a look at what analysts said on outlook of the stock.  

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Abhijeet from Tips2trades said, "Tata Power is bearish with a strong resistance at Rs 230. A daily close below the support of Rs 222 could lead to a target of Rs 204 in the coming weeks." 

Vaibhav Kaushik, Research Analyst, GCL Broking said, “As we can see, the company is continuously working on growth of green energy. Recent order books were also very strong.  The stock is also under consolidation from one year. Now it is ready for a target of Rs 370 in the next one  year. Keep a stop loss of Rs 197.”  

Ritu Singh, Senior Research analyst, Drsfinvest said, “Tata Power share price is expected to rise due to benefits of increase in power consumption in the summer season. The power consumption demand in India is growing at whopping 8 percent annually. 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 250 in coming trading sessions.” 

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