Tata Power stock falls 5% intraday despite strong Q1 earnings show, here's why

Shares of Tata Power fell nearly 5 per cent today despite the firm reporting doubling of consolidated profit year-on-year (YoY) to Rs 795 crore for the quarter ended June 30, 2022.  The company had reported a net profit of Rs 391 crore in the year-ago period.

With the latest earnings show, the company has reported profit after tax (PAT) growth for consecutive quarters, Tata Power said.  

However, Tata Power's earnings failed to excite the stock market on the earnings before interest, taxes, depreciation, and amortisation (EBITDA) front. The Tata Group stock fell 4.71 per cent intraday to Rs 215.5 against the previous close of Rs 226.15 on BSE.  Later, the Tata Power stock ended 3.63 per cent lower at Rs 217.95.  

Tata Power shares stand lower than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages.    

The stock has gained 78.78 per cent in a year but fallen 2 per cent in 2022. In a month, the stock has gained 4 per cent.  Total 23.72 lakh shares of the firm changed hands amounting to a turnover of Rs 51.90 crore on BSE. The market cap of the firm fell to Rs 69,163 crore on BSE.

ALSO READ: Tata Power Q1 results: Consolidated net profit more than doubles to Rs 795 cr

Sales zoomed 45.42 per cent to Rs 14,495 crore in Q1 against Rs 9,968.03 crore in the June quarter of the preceding fiscal.  

Consolidated EBITDA fell by Rs 258 crore to Rs 2,107 crore in Q1 of this fiscal against Rs 2,365 crore in Q1 FY22.  Similarly, standalone EBITDA fell to Rs 1,271 crore as against Rs 1,405 crore in Q1FY22 (due to favourable regulatory order in Mundra the previous year).  

Operating profit (consolidated) fell by Rs 223 crore to Rs 1,964 crore in Q1 of the current fiscal against Rs 2,187 crore operating profit in the corresponding period of the previous fiscal.

Tirthankar Das, Head of Technical Research, Ashika Group said, "In the recent period, Tata Power stock reacted lower after facing resistance at 23.6 per cent retracement of the entire rally since May 2020. All the crucial short -long term averages are trading above prices indicating of a negative outlook in the stock. Presence of 'Death Cross', with short-term average of 50 falling below 200 DMA, reflects recent price weakness. Despite its ominous name, the 'Death Cross' is not a market milestone worth dreading. However, amid all the negativity the only silver lining being the stock is close to its historical support level of  Rs 200- Rs 205 which also coincides with the 38.2 per cent retracement. The stock is seen rebounding from the said support level for multiple number of times. Hence one can expect the stock to head towards Rs 250- Rs 256 in near term (50 per cent retracement of the recent April 2022-June 2022 decline  Rs 298- Rs 190). Traders can accumulate the stock around Rs 195- Rs 200 levels."

Brokerage CLSA has given a 'sell' call on the stock with a target price of Rs 212 post Q1 earnings. Indonesia coal business remains a key driver, CLSA said adding that engineering, procurement, and construction (EPC) businesses for solar and construction slipped into losses on a rise in material costs, unhedged forex exposure and aggressive bids. The stock remains expensive, at a 23 times FY24CL earnings per share (EPS).

Manoj Dalmia, founder and director, Proficient Equities said, "The company said it plans a consolidated CAPEX of Rs 14,000 crore in 2022-23, including a Rs 10,000 crore investment in the renewables sector. The valuation seems expensive due to the high coal prices rally which took place recently. It might face some selling in the coming days with a target of Rs 194."

Ravi Singh, vice President and head of Research, Share India said,"Tata Power stock is currently witnessing profit booking amid robust Q1 growth numbers. The surge in power demand and high profits through coal venture has increased the company's revenue growth. As the stock price has already discounted the rise and no major trigger in near term, there is limited upside in the counter from the current levels. It may touch the levels of  Rs 240 in three months."

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