Tata Power shares run out of steam; time to buy, sell or hold?

Shares of Tata Power are trading under pressure, shedding their multibagger tag during the last one year and in 2022. Earlier, the power sector stock from the Tata Group delivered 218% returns during two years. The stock rose from Rs 71.65 level to Rs 228 today since December 2020. Similarly, Tata Power shares zoomed 328% in three years, making it among the top performing scrips in the power sector during the period. However, the rally has slowed in a year with the stock trimming a majority of its gains. The scrip has gained 3.67% in one year and risen 3.67% in 2022.

In comparison, the stock of Adani Power has gained 228 percent in a year and risen 222 percent since the beginning of this year. During the three-year period, the Adani Group stock has zoomed 445%.

Meanwhile, Tata Power has a one-year beta of 1.2%, indicating high volatility during the period. It is currently trading higher than the 5-day, 20-day, 50-day and 100-day moving averages but lower than 200-day moving averages. Tata Power has a high PE ratio of 28.17 against the industry PE of 10.46. 

In the second quarter of the current fiscal, Tata Power reported a 85 per cent rise in its consolidated net profit to Rs 935.18 crore on the back of higher revenue. Net profit of the company stood at Rs 505.66 crore in the quarter ended September 30, 2021. 

Total income of the company climbed to Rs 14,181.07 crore in Q2 from Rs 10,187.33 crore a year ago. In the current trading session, the stock touched an intraday high of Rs 230.25 rising 2.72% on BSE. They opened at Rs 224 against the previous close of Rs 224.15 on BSE.   Total 5.89 lakh shares of the firm changed hands amounting to a turnover of Rs 13.42 crore in the afternoon session. Market cap of the firm rose to Rs 72,949 crore on BSE.

The stock hit a 52-week high of Rs 298 on April 7, 2022 and a 52-week low of Rs 190 on June 20, 2022 on BSE.

Also Read: Tata Power is evolving into a power solutions provider. What exactly does that mean?

Here’s a look at what analysts said on the outlook of the stock amid flat returns it has been delivering since the last one year.

Manoj Dalmia, Founder & Director at Proficient Equities said, “Tata Power had seen some rally due the speculation around coal price fluctuations. It declared a consolidated profit of Rs 935 crore, registering an on-year growth of 85 percent over a consolidated profit of Rs 506 crore last year. The stock is in consolidation phase and can see some momentum above Rs 300 with a target of Rs 350-400 in the long term.”

Abhijeet from Tips2trade said, “Despite steady growth in terms of revenue and profitability, consistently rising debt in Tata Power’s balance sheet amid a rising interest rate scenario has ensured a subdued 2022 in terms of stock price returns. Currently, this stock is in a range of  Rs 210-235. Investors can buy near Rs 210 or wait for a daily close above Rs 335 to buy for targets of Rs 270-295 in the coming weeks.” 

Jitendra Upadhyay, senior equity research analyst at Bonanza Portfolio said, “It is believed that the long-term potential of the company’s businesses is high as it is best placed to participate in the renewable energy capacity addition program of the Government of India and any privatization. If we talk about the role of Tata Power’s role in the electric vehicle sector, the company is continuously installing power stations at different locations and already added more than 1000 plus charging stations and aims to multiply those by 5 times in the next 5 years.  Although the future prospect of the company looks strong but still in recent times, the company has already peaked up for a time. It may be a good time to buy Tata Power on every dip for a long-term perspective.”