Is Tata Power Stock a Good Buy?

Tata Power Stock has given more than 100% return in the recent past. Why is there so much fuss about Tata Power stock? What is cooking inside? Why there is a sudden hike in the stock price? Let’s check all the details of the stock.

About Tata Power Ltd.

The company was founded on 18th September 1919 and its headquarter is in Mumbai. Tata Power Ltd. is into the business of power generation and transmission & distribution. The company operates through the following business segments:

  • Power Generation
  • Transmission & Distribution
  • Renewable Energy (Solar and Wind Power)
  • Project Management

Tata Power Stock Price Trend

Let’s first have a look at the Tata Power stock price trend for last one year. During the last year, there are almost all the stocks that have seen the major ups and downs due to Corona virus. This stock is no different then the other stocks.

tata power stock price

If you see the bottom of the stock, it was ₹ 27 in the month of June 2020. But then in the month of December 2020, the stock has started relied on and reach ₹ 80. During this quarter, the promoters have increased their stake from 37% to 47% in October. There is also a good quarterly result that gave a push to the stock and by February 2021 the stock has reached ₹ 100 level.

Let’s check the fundamentals of Tata Power Ltd.

Market Cap₹ 33296 Cr. (as of 18th March 2021)
Stock PE Ratio36
Book value₹ 68
Debt to Equity Ratio2.03
Eraning Per Share (EPS)₹ 3.90
Price to Book Value1.53
Dividend Yield1.49
Promotors Holding46.8%
Debt₹ 44071 Cr.
Return on Equity (Last 5 Years)3% Only

Looking at the above details no one would love to invest in the company. But still, people are investing in this stock, why? Well, there is a flip side as well. let’s check that as well.

The company has recently de-leveraging its assets to lower down debts by the way of:

  • Sale of Cennergi
  • Sale of shipping companies
  • Issuing preferential shares to Tata Sons

Tata Power aims to double its revenue by the year 2025 due to its strong presence in the solar rooftop, solar pumps, and upcoming electric vehicle business.

Have a look at the electricity demand projection by 2025 in the below picture.

tata power projection

The increasing electricity demand will surely help the company to boost sales and revenue. This is the reason why the company is expecting the revenue to double by 2025.

In addition, the company also plans to expand in new energy businesses such as Home Automation and EV charging stations across the country. The targeted revenue of ₹ 35 billion by FY 2025 is expected.

Pros and Cons of Tata Power Ltd

Making net Profits since last 2 yearsThe company has delivered a poor sales growth of -2.81% over the past five years.
Low EPS, High PE RatioThe company has a low return on equity of 2.05% for the last 3 years.
EV is the futureHigh debt company
Good return in past 1 year (205%)Return on equity of only 3% in last 5 years

Should you Invest in Tata Power Ltd?

For any investment you do, the first thing you should keep in your mind is about the product or the service it offers. If the product or the service of the company is long-lasting and there is a lesser competition then there are chances that the stock will give you good returns in the long term.

Now talking specifically for Tata Power, the requirement of the power will go up as India is a developing country having an electricity deficit. So I can say that there is a market available for the product. Secondly, Tata Power is one of the companies from Tata Group whom you can always trust in terms of their business ethics and principles.

But looking at the fundamentals of the stock, I would advise not to invest in Tata Power Stock as there are many other good opportunities available that can give good returns as compared to Tata Power.

people say Tata Power stock can be the next multi-bagger stock but I don’t think so it would be a multi-bagger in the near future as there is a huge debt on the company.

Disclaimer: These are my views only, please do not take this as investment advice in any way whatsoever.

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