Shares of Tata Power soared 11 percent on December 7 to hit a fresh record high after brokerage firm JM Financial upgraded the stock to 'buy' rating from hold earlier. With the stellar gains, the company also became the sixth firm belonging to the Tata Group to have surpassed the Rs 1 lakh crore market cap.
On December 7, shares of Tata Power settled 10.8 percent higher at Rs 325.80 on the NSE. The stock had scaled an all-time high of Rs 332.15 earlier in the day.
Aside from a ratings upgrade, JM Financial also raised its price target on the stock by 40 percent to Rs 350 from the earlier target of Rs 220. The revised price target implies a potential rally of 24 percent over the next 12 months.
In its most recent report, JM Financial highlighted four key elements of Tata Power's strategic recalibration plan. These include capitalizing on the lucrative group captive renewables opportunity, divesting from low-value businesses, entering the brownfield hydro storage sector, and extending the transmission business beyond distribution.
The brokerage firm envisions a positive resolution for Tata Power regarding the Mundra issue.
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Analysts at JM Financial project a 15 percent Compound Annual Growth Rate (CAGR) for revenue, a 23 percent growth in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), and a 32 percent increase in net profit from the financial year 2023 to 2026.
They anticipate that Tata Power's earnings will be buoyed by an expanding asset base and an enhanced margin profile.
Consistently securing new orders, Tata Power recently secured the Bikaner-Neemrana transmission project, aimed at enhancing the evacuation of renewable energy in India. The company's stock is on an upward trajectory, driven by a robust order book and the anticipated government focus on the power infrastructure sector in the upcoming budget.
Technical View
"Since March 2023, Tata Power stock has been making higher highs and higher lows, which is a sign of a well-established bull trend," Jigar S Patel of Anand Rathi Shares & Stock Brokers told Moneycontrol.
At the current juncture, it has taken out its April 2022 high of Rs 292.95 and is currently placed near Rs 294 mark. "Since Directional Movement Index (DMIs) are positively poised, one can expect bullish momentum to continue in Tata Power. One can buy in the zone of Rs 294–295 for a target of Rs 310 and a stop-loss of Rs 286 on a daily close basis," Patel said.
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