Tata Power stock slips 9% post Q4 earnings, here's why

Shares of Tata Power fell 9 percent in early trade today despite the Tata Group firm reporting a decent set of earnings in Q4 of the last fiscal. Analysts cited underperformance in coal-related business as a key factor behind the fall in stock.

Tata Power stock touched an intraday low of Rs 223.05, falling 9.03 per cent on Monday.  The large-cap stock opened with a loss of 4.02% at Rs 235.35 against the previous close of Rs 245.20 on BSE. The share stands higher than 50-day, 100-day and 200-day moving averages but lower than 5-day and 20-day moving averages.

Tata Power stock has gained 122.7 per cent in one year and risen 3.49 per cent since the beginning of this year.

Total 34.25 lakh shares of the firm changed hands amounting to a turnover of Rs 78.15 crore on BSE. Market cap of the firm rose to Rs 73,109 crore.

At 11:11 am, the stock fell 6.69 percent to Rs 228.60 on BSE.

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CLSA has given a sell call on the stock post Q4 earnings. The international brokerage expects the stock to fall to Rs 212 in a year. It was a weak 4Q pepped-up by tax break on CGPL merger, it said.  

The stock remains expensive at 24 times FY24CL earnings per share. War-led commodity spikes and a retail frenzy provide an exit opportunity in the stock, CLSA added.

Pavitraa Shetty, Co-founder & Trainer, Tips2Trades, "Despite strong profit growth in FY2022, increasing debt levels amid rising inflation and interest rate scenario has led to a sharp downtrend in Tata Power stock price today. Technically, Rs 226 remains a strong support. A daily close below this level could lead to falling up to Rs 215. Strong resistance will now be at 237."

Santosh Meena, Head of Research at Swastika Investmart said, "Tata Power has delivered a decent set of nos., albeit below street expectations. The biggest disappointment has been the coal related business, where the division has posted a loss of Rs 178 crore in Q4 compared to an Rs 28 crore loss in Q4 2021. However, the management expects improved performance in the next six months, as there are signs of respite from the Mundra issue."

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"The stock price had increased substantially from Rs 238 to about Rs 289 in the first week of April, i.e. a 21 per cent return in just a week. Post that, the stock is in a downtrend due to a lower than the expected valuation of renewable business's stake sale, weak market sentiments and high valuations. However, India is a power-deprived country and the Indian power demand is on the cusp of exponential rise due to rising population, an increase in temperatures, higher urbanisation, adaptation of EV's etc. We are positive about Tata Power stock because of its integrated nature of operations and a diversified portfolio of renewable and non-renewable assets. The current price provides a good entry point for the long-term investors," Meena added.

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Tata Power logged a 31 per cent rise in consolidated profit after tax (PAT) at Rs 632 crore for the quarter ended March 2022 against a net profit of Rs 481 crore in the year-ago period. This is the tenth consecutive quarter of PAT growth.

Tata Power's PAT before exceptional items stood at Rs 775 crore. "Consolidated PAT before Exceptional Items up by 76 per cent YoY (year-on-year) at Rs 775 crore in March quarter vs Rs 440 crore in Q4 FY21 (March quarter)," the company said.

Revenue from operations climbed 16 per cent to Rs 12,085 crore in the quarter under review from Rs 10,379 crore in the same quarter last fiscal. The company's EBITDA, or earnings before interest, taxes, depreciation, and amortization came in at Rs 2,253 crore in Q4FY22, a growth of 35 per cent from Rs 1,668 crore in Q4FY21.

On an annual basis, the firm logged a 54.47 per cent rise in consolidated profit after tax (PAT) at Rs 1,741.46 crore for the fiscal ended March 2022 against a net profit of Rs 1,127 crore in the year-ago period. Sales climbed 31 per cent to Rs 42,815 crore in last fiscal against Rs 10,379 crore sales in the fiscal ended March 2021.