Tata Power stock in consolidation mode, should you buy on dips?

Shares of Tata Power Company Ltd are consolidating in a range after falling from their all-time high. Tata Power stock hit an all-time high of Rs 494.85 on September 27, 2024. Since then, the stock has lost 11.5%. Since then, it has traded within a narrow range of Rs 441.30 to Rs 436.60. On the other hand, the stock has gained 89.19% from its 52-week low of Rs 230.75 hit on October 26 last year. Amid the rally, the stock has also been highly volatile over the same period. Its one-year beta is 1.5.

Choice Broking in its Diwali Picks 2024 report has listed Tata Power as its top pick.

“Tata Power is approaching a key demand zone, which could present a buying opportunity if signs of a reversal emerge. A ‘buy on dips’ strategy is recommended, with entry points up to 400 levels, targeting- se to an upside range of Rs 500-520. This approach offers potential for gains, provided the stock reverses from its current consolidation phase,” the brokerage said.

Another brokerage Motilal Oswal is bullish on the stock’s outlook. He has initiated coverage of the company, naming it one of the top picks in the Indian power sector. The brokerage set a price target of Rs 530, with a “buy” rating.

Tata Power’s diversified operations and scalability are key growth drivers for the Tata Group company. “The company is undergoing a multi-year business transformation, with plans to allocate 45% of its capital expenditure from FY2023 to FY2027 to renewable energy projects. This strategic shift is expected to increase the share of basic income from 40% to 90% during the same period,” according to Motilal Oswal’s note.

Brokerage Nomura India has a price target of Rs 560 on Tata Power. Nomura expects Tata Power’s outlook to be strong as the company aims to deliver significant EBITDA CAGR in FY24-27.

The brokerage said Tata Power is likely to perform well in its EPC business, helped by a growing order book. The order book currently stands at Rs 15,700 crore. The power sector company is also seen expanding its recently commissioned 4.3GW cell-to-module facility. Tata Power could see a sharp jump in the profitability of the Odisha DISCOM business, Nomura India said.