See 30% returns in Torrent Power: SP Tulsian

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See 30% returns in Torrent Power: SP Tulsian

See 30% returns in Torrent Power, says SP Tulsian, sptulsian.com.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by SP Tulsian See what other Experts & Brokerages are saying about Torrent Power See messages about Torrent Power

See 30% returns in Torrent Power , says SP Tulsian, sptulsian.com.

Tulsian told CNBC-TV18, "I find this stock quite interesting amongst the power generation play. If you first see their business model they have an operating capacity of 1650 mega watt (MW) and that has been operating quite well. Apart from that they have distribution license in Ahmedabad, Gandhi agar, Surat, Bhiwandi and Agra because maybe 6-7 years back they acquired two companies Surat Electricity and Ahmedabad Electricity."

He further added, "They got this distribution power, Bhiwandi they got this distribution rights couple of years back when people were apprehensive that they will not be able to make because at that time in Bhiwandi the power theft used to be of 40-50% and people were quite upset about the company taking the distribution rights of that Bhiwandi area but they have dramatically turned around and showed that theft can reduce if it is run efficiently and if it is in the hands of private sector.

"Now if I take the Q1 results on FY11, the Q1 indicates a growth of about 20% topline and bottomline. FY11 had an EPS of around Rs 22.50, while Q1 has already posted an EPS of close to Rs 7.40 that implies that FY12 will be having an EPS of Rs 30. So that gives a PE multiple of less than 8 or 7.5 times of the current year's earnings."

"Apart from that the company is setting up a new power generation project of 1200 MW which is gas based and I think that will be a real kicker for improving the profitability of the company in times to come. If you see the financials of the company they are quite in place, their debt equity ratio is very comfortable."

"They have very comfortable cash position, the PE multiple is quite attractive. So, taking all this into consideration, apart from that the shareholding pattern has been quite stable; the promoter holding 53%, 31% is held by the institutional investors in which Gujarat government is holds about 5-6%, so that adds to about 84% and HNIs are holding about 7-8%. So the public float is also very low about 6-8%."

"If one can keep a view of about 12 months this stock is really capable to give a return of close to 30% plus and otherwise also it is a very sound stock to have in one's portfolio with a very long-term horizon."