Tata Power shares up 16% in six months, stock sees profit booking near 52-week high; time to buy, sell or hold?

Tata Power Company Ltd shares gained a little over 16 per cent in the last six months. The stock recently saw some profit booking around its one-year high price, an analyst said. The scrip halted its three-day upward run in Friday's trade and was last seen trading 0.44 per cent lower at Rs 236.10. At this price, the counter was 5.94 per cent away from its 52-week high of Rs 251, a level seen on September 7, 2022.

On the earnings front, the energy arm of the Tata conglomerate recorded a more than 22 per cent jump in first-quarter profit, led by robust growth in its transmission and distribution segment. Consolidated net profit rose to Rs 972 crore for the quarter ended June 30, compared with Rs 795 crore a year ago.

Revenue from operations increased nearly 5 per cent to Rs 15,213 crore, helped by a 3.60 per cent growth in the transmission and distribution segment. The said segment is the company's largest business.

Sales of commercial vehicles have increased amid a pick-up in construction projects, as the government pushed for higher capital expenditure (capex) in its last full Budget ahead of elections due in 2024.

Foreign brokerage CLSA has upped Tata Power's share price target to Rs 195 from Rs 189, but maintained its 'Sell' rating, citing expensive valuations. "We rate Tata Power 'Sell', despite its underperformance, as we believe it has run ahead of its fundamentals on a retail frenzy, a spike in coal prices and a strategic stake sale of its renewables (RE) arm. Odisha discoms and expansion into pump storage remain the key bright spot, in our view. Weak coal prices are a key negative catalyst leading to risk to its earnings per share EPS," it said.

On technical setup, support on the counter could be seen at Rs 232, followed by Rs 230 and Rs 210 levels.

Osho Krishan, Senior Analyst, Technical & Derivative Research at Angel One, said, "Tata Power has strongly rebounded from the lows of Rs 180-odd zone and has surged nearly 25 per cent in the current financial year. Currently, the stock is hovering near the higher band of the broader consolidation range with bullish biases. As far as levels are concerned, the immediate support is placed around Rs 230, followed by sacrosanct support of 200-SMA around Rs 210. On the higher end, a decisive breakthrough above Rs 245 would trigger fresh longs in the counter for the next potential resistance of Rs 263-267 in the comparable period."    

Vaishali Parekh, Vice-President - Technical Research at Prabhudas Lilladher, said, "The stock has witnessed some profit booking from the peak level of Rs 245 to consolidate with support maintained near Rs 232 levels. A closing above Rs 237 level is required for a fresh upward movement. And, a decisive breach above Rs 245 zone shall give a breakout for fresh upward movement with next targets of Rs 258 and Rs 270 levels."

Market expert Ravi Singh said, "Tata Power share price is expected to rise due to benefits of increase in power consumption in summer season. High power demand and rise in power prices would help the company in maintaining strong gross margins. On technical setup, the stock is showing strength on daily and weekly chart to touch Rs 255 level in coming trading sessions."

Meanwhile, Indian equity benchmarks were in red today, dragged by pharma, healthcare, consumer goods, bank and financial stocks.

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