Tata Power Shares Jump Despite Analyst Downgrades
Tata power defies analysts ratings.
Shares of Tata Power Co. jumped for the sixth straight session even as two brokerages downgraded the stock citing valuations.
Citi and CLSA reduced the rating on Tata Power to 'sell' on Monday.
Still, the shares of Tata Power continue to rally. The stock has risen 13.12% in the last six trading sessions compared with the BSE Sensex's 1.59% gain. So far this year, the company's scrip has advanced 220%, while the benchmark jumped 26.21%, according to Bloomberg data.
A possible trigger could be the likelihood of the stock being included in the MSCI Standard Index. An Edelweiss report suggests a formal announcement on the inclusion could come on Nov. 12.
The company's chief executive last week told BloombergQuint that it plans to improve operating profit in the next few quarters through higher tariffs and sustained generation from its power plant at Mundra, among others.
The Bloomberg consensus 12-month price target is at Rs 189.57, implying potential downside of 22.5% from Tata Power's Monday close.
Here's what brokerages have to say about Tata Power:
CLSA
Downgrades to 'sell' from 'buy', but raises target to Rs 191 from Rs 160.
The stock has run ahead of its fundamentals on retail frenzy.
Much of a pre-buy ahead of its likely inclusion in MSCI India Index.
Remains to be seen whether Tata Power's operation of Mundra can continue depending on tariff hike in FY23.
Tata has undershot its 2 gigawatts per annum win target for renewable energy independent power producers business.
Entry of large natural players and weak demand makes it difficult for the company to achieve FY25 target of 15 gigawatts.
Likely loss of production linked incentive tender shall restrict scalability of its solar engineering, procurement and construction business.
Raises target price after hiking FY22-24CL earnings per share 5-10% on strong net coal and re-rating of its renewable energy IPP business.
Citi
Downgrades to 'sell' from 'buy', but raises target price to Rs 192 from Rs 153.
Valuations leave little room for error.
Stock trading at 3x FY23E book value with average expected return on equity of about 11.5% versus past five years average price-to-book value of 1.2x.
Much-awaited renewable portfolio deal; InvIT is yet to fructify.
Mundra ultra mega power project remains a pain point. Coal prices are supporting consolidated earnings.