Tata Power shares have surged by 50% in 2023, surpassing the Nifty 50 benchmark, which has seen an increase of nearly 15% during the same period.
On December 7, Tata Power shares surged by 11%, reaching a new record high following a ‘buy’ rating upgrade from JM Financial, replacing its previous ‘hold’ rating. This remarkable increase propelled the company into the prestigious club of Tata Group firms with a market capitalization exceeding Rs 1 lakh crore.
Closing at Rs 325.80 on the NSE, a gain of 10.8%, Tata Power experienced strong positive momentum, achieving an all-time high of Rs 332.15 earlier in the day. JM Financial not only upgraded the rating but also raised the stock’s price target by 40% to Rs 350, indicating a potential 24% rally over the next 12 months.
In its recent report, JM Financial outlined Tata Power’s strategic recalibration plan, emphasizing key elements such as capitalizing on group captive renewables, divesting from low-value businesses, entering the brownfield hydro storage sector, and expanding the transmission business beyond distribution.
JM Financial expressed optimism regarding the Mundra issue’s resolution for Tata Power. Analysts foresee a 15% Compound Annual Growth Rate (CAGR) for revenue, a 23% growth in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), and a 32% increase in net profit from FY 2023 to 2026. They anticipate earnings growth driven by an expanding asset base and an improved margin profile.
Recently securing the Bikaner-Neemrana transmission project to enhance renewable energy evacuation in India, Tata Power’s stock is on an upward trajectory, supported by a robust order book and expectations of government focus on the power infrastructure sector in the upcoming budget.
From a technical perspective, Jigar S Patel of Anand Rathi Shares & Stock Brokers noted that Tata Power’s stock has been establishing higher highs and higher lows since March 2023, indicating a well-established bullish trend. Patel suggested a buy zone of Rs 294–295 with a target of Rs 310 and a stop-loss of Rs 286 based on the positive positioning of the Directional Movement Index (DMIs) and anticipated bullish momentum.