Image credits - Quora
In the dynamic world of stock markets, Tata Power has emerged as a beacon of success in the fiscal year 2023-24, witnessing a bullish trend that has captivated investors. This journey is characterized by a compelling narrative, from the stock’s bottoming out at ₹185 per share in March 2023 to becoming an enticing ‘buy on dips’ option, consistently reaching new highs in the last two months and delivering a remarkable 80% return to long-term investors.
Tata Power’s Meteoric Rise:
Early Indicators: A ‘Buy on Dips’ Opportunity
Tata Power’s share price, hitting a low of ₹185 per share on the NSE at the close of March 2023, provided astute investors with a prime ‘buy on dips’ opportunity. This early indicator set the stage for what would become a notable surge in the company’s shares.
Over the subsequent two months, Tata Power’s shares have not only rebounded but consistently touched new highs. This impressive performance has translated into an over 80% return for long-term investors, making Tata Power a standout performer in the current fiscal year.
Factors Driving Tata Power’s Soaring Shares:
Strategic Orders and Market Perception
Amit Goel, Co-Founder and Chief Global Strategist at Pace 360, sheds light on the triggers behind Tata Power’s remarkable ascent. The stock has experienced a 46% rise since October-end, shedding its erstwhile status as a defensive bet within the Tata Group. The market cap has surged to nearly ₹1.09 lakh crore, underscoring a significant shift in market perception.
One pivotal factor contributing to Tata Power’s success is the consistent influx of massive orders. Notably, the recent acquisition of the Bikaner-Neemrana transmission project has not only bolstered the company’s portfolio but has also played a crucial role in advancing India’s renewable energy evacuation capabilities.
Clean Energy Portfolio and Growth Projections
Tata Power currently boasts a clean energy portfolio of 5.5 GW, with ambitious plans to elevate this to 20 GW by 2030. With 3.7 GW already under construction, the company’s growth projections are compelling. Management’s guidance of doubling revenue, EBITDA, and PAT by FY27 further reinforces the company’s commitment to sustainable growth.
Power Sector Traction and Business Restructuring
Manish Chowdhury, Head of Research at StoxBox, highlights the positive impact of the recent traction in the overall power sector on Tata Power’s share prices. The company’s strategic focus on enhancing its renewable portfolio aligns with market expectations, paving the way for a projected 4x growth in profitability by FY27 over FY22 levels.
Furthermore, Tata Power’s foray into the transmission business and a dedicated effort towards business restructuring contribute to a positive outlook for future growth. The regulated tariffs set by the Central Electricity Regulatory Commission (CERC) and the government’s comprehensive power sector package add to the robust framework ensuring earnings visibility for Tata Power’s high capital expenditure initiatives.
Strong Fundamentals and Order Book
Atul Parakh, CEO at Bigul, emphasizes the robust fundamentals of Tata Power. A strong order book, driven by increasing demand for renewable energy solutions and active participation in key government infrastructure projects, positions Tata Power as a formidable player in the sector. The company’s aggressive expansion in the renewable energy space, particularly in solar and wind power generation, aligns seamlessly with the Indian government’s clean energy transition goals.
Resilience Amidst Challenges
Despite challenges such as rising coal prices, Tata Power has showcased financial resilience with consistent profitability and revenue growth. The Indian stock market’s revived optimism in recent months has contributed to the positive sentiment surrounding Tata Power as a leading player in the energy sector. The stellar performance of the Tata Group as a whole further amplifies the positive outlook for Tata Power shares.
Chart Patterns and Short-Term Targets
Sumeet Bagadia, Executive Director at Choice Broking, offers insights into the technical aspects of Tata Power shares. The stock’s strength in chart patterns suggests a continued bullish trend. Shareholders are advised to hold the script for short-term targets of ₹360 and ₹375, with a recommended trailing stop loss at ₹325.
Fresh Investment Opportunities
For fresh investors, Bagadia suggests considering a new entry into Tata Power shares, targeting the aforementioned short-term goals of ₹360 and ₹375. However, a cautious approach is recommended, with the stipulation to maintain a stop loss at ₹325 when initiating a fresh position in this Tata Group stock.
In conclusion, Tata Power’s journey in FY24 exemplifies the resilience and strategic prowess of the company in navigating dynamic market conditions. From being a defensive bet to a standout performer, Tata Power’s ascent reflects a combination of strategic orders, clean energy focus, growth projections, and positive sentiments within the power sector.
As the fiscal year unfolds, Tata Power’s commitment to sustainable growth, coupled with its strong fundamentals and proactive business strategies, positions the company for a radiant future. Investors, both existing and potential, are advised to closely monitor market dynamics, technical indicators, and the evolving landscape of the power sector to make informed decisions in this compelling investment opportunity.