This Tata Stock Has Surged 40% In 6 Months, But Analysts Now Expect Heavy Correction

Tata Power’s share price has been on a bull run over the last six months. Just in the last 30 days, the stock has surged up over 15%, now analysts at Kotak Securities see the stock headed for some correction.

The Tata Power Analyst: Analysts at Kotak maintained the “sell” rating on the stock but did hike the price target to ₹245 from ₹230. The revised target still indicates a 25% downside from the stock’s last closing price of ₹330.30.

The Tata Power Thesis: The analyst’s estimate that the Tata Group stock has experienced a 26% rally in the past month, largely attributed to the optimistic targets outlined by the management during their annual analyst day. However, as per the brokerage, a closer look at the composition of earnings performance reveals a different narrative. Despite the stock’s recent surge, some aspects of the earnings structure may not align with the overall market sentiment.

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The market seems enthusiastic about the management’s decision to moderate capital expenditure (capex) and capacity addition targets. This strategic move appears to resonate well with investors, contributing to the positive momentum in the stock.

The brokerage added that valuations currently appear rich. This might be reflective of high expectations from the market participants, possibly factoring in the perfect execution of the company’s plans.

The brokerage added that while the company has tripled PAT to ₹3,800 crore, but as much as ₹2,200 crore of increase came from coal profits.

Price Action: Tata Power’s share price was down 1.91% to trade at ₹324 on Tuesday morning.

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Posted In: Analyst ColorEquitiesLong IdeasPrice TargetReiterationMarketsAnalyst RatingsTrading IdeasKotak Institutional EquitiesTata GroupTata Power