Tata Power shares surge to fresh record high on Morgan Stanley upgrade, target price hike

In the last one year, Tata Power stock has rallied 88 percent. In comparison, Nifty gained 30 percent during this period.

Shares of The Tata Power Company jumped to hit a fresh all-time high of Rs 494.85 on NSE after Morgan Stanley upgraded the stock to an 'overweight' rating from 'underweight' earlier.

The global brokerage firm also hiked the price target for Tata Power shares to Rs 577, suggesting an upside of 1 percent increase from the previous closing.

Morgan Stanley analysts highlighted the effective combination of Tata Power's stable, regulated businesses and its market-linked initiatives, including the green platform, transmission, and pumped hydro projects.

This diversified approach is anticipated to drive earnings growth while maintaining a reasonable return on capital employed, excluding the Mundra project, and keeping leverage manageable. The broking firm also acknowledged the quality of Tata Power's projected growth, particularly the contributions from its green platform compared to its historical performance.

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Domestic brokerage Motilal Oswal highlighted the power sector as a “colossal multi-decade investment opportunity”, with Tata Power being one of its top picks.

It initiated coverage on the Tata Group company stock earlier this week with a 'buy' rating and a price target of Rs 530. Diversified operations and scalability are key growth drivers for the Tata group firm, it said.

Tata Power is undergoing a multi-year business transformation, with 45 percent of capex over FY23-27 to be allocated to RE projects. This is instrumental in increasing the share of core earnings from 40 percent to 90 percent over FY23-27, MOFSL analysts noted.

"At 13 times EV/Ebitda (long term average: 10 times), we believe there is scope for further re-rating given lower earnings volatility (vs. history) and strong 14 per cent PAT CAGR in FY24-27," MOFSL added.

At 10:48 am, Tata Power shares were trading more than 3 percent higher at Rs 490.60 on NSE. So far this year, the stock has gained 48 percent, compared to an 18 percent rise in benchmark Nifty. In the last one year, the counter has rallied 88 percent. In comparison, Nifty gained 30 percent during this period.

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