Shares of Torrent Power Ltd have surged 8.98 per cent in two consecutive sessions. The stock settled 4 per cent higher at Rs 531.40 on Wednesday. Geojit Financial Services has given a ‘Accumulate’ call on the counter with a target price of Rs 550 over a one-year period.
The brokerage, in its report, said, “The distribution businesses foresee increased productivity as a result of decreased T&D (Transmission and distribution) losses and expansion ambitions to boost the top line. By FY25, we anticipate a 28 per cent rise in renewable capacity, spurred by capacity augmentation.”
Geojit also mentioned that the mid-cap power company’s revenue growth would stay intact as it maintained a healthy operational performance, which was contributed by the addition of a newly licensed area, low AT&C (Aggregate Technical & Commercial) losses, higher demand, and improved collections across distribution areas.
“This boosted revenue in 9MFY23, reported at Rs 19,656 crore, showed a growth of 87 per cent when compared to 9MFY22 of Rs 10,514 crore. This is mainly due to a 63 per cent increase in the sale of units in the distribution areas. The margins, however, declined to 18.70 per cent from 24.70 per cent during the period due to low fuel-based incentives and impairment charges at the DGEN plant,” it stated.
By reducing losses through smart metering and maintaining strict supervision in the distribution areas, Torrent Power has been able to manage its distribution segments effectively, it added.
“It has plans to expand its renewable assets with a total capacity of 715 MW, which consists of 300MW of solar and 415 MW of wind. Additionally, a potential acquisition of the distribution areas of Nagpur and adjoining areas is under discussion,” it further stated.
Given Torrent Power’s healthy balance sheet and robust performance from its licensed and franchised distribution segments, along with improvements in PLF (Plant Load Factor) for both generation segments, Geojit anticipated that the company’s earnings would improve.
On the technical front, the stock traded higher than the 5-day, 20-, 50-, 100- and 200-day moving averages. The counter’s 14-day relative strength index (RSI) came at 57.64. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company’s stock has a price-to-equity (P/E) ratio of 22.35.
The scrip has an average target price of Rs 542.50, Trendlyne data showed, suggesting a potential upside of 2.31 per cent. The stock has a one-year beta of 0.83, indicating low volatility.
Torrent Power is the flagship company of the Torrent Group. It has 4109.5 MW of total installed capacity, which comes from thermal and renewable energy generation facilities. For the transmission of electricity produced by gas-based power plants, the company also owns and operates 482 km of transmission lines.
Meanwhile, Indian equity benchmarks would remain closed today on account of Ram Navami. The equity derivative segment, equity segment, the SLB (Security Lending and Borrowing) segment, the currency derivatives segment and the interest rate derivatives segment would also remain closed, as per the BSE website.
Trading on the domestic bourses, BSE and NSE, would resume on Friday, March 31. However, the Multi Commodity Exchange (MCX) would open today for the evening session at 5 pm.
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