Accumulate Torrent Power; target of Rs 550: Geojit

Geojit's research report on Torrent Power

Torrent Power Ltd. (TPL) is one of the leading power utility companies in India, with functions across generation, transmission, and distribution. It has operations spread across Gujarat, Maharashtra, UP, and Karnataka. The distribution businesses foresee increased productivity as a result of decreased T&D losses and expansion ambitions to boost the top line. By FY25, we anticipate a 28% rise in renewable capacity, spurred by capacity augmentation. With the expected drop in gas prices, we believe that the gas plants’ efficiency will improve, resulting in increased profitability. The company is expected to maintain a debt/equity ratio of 0.7x in FY25, down from 0.9x in FY23, and an ROE of 16% in FY25.

Outlook

We initiate TPL with an Accumulate rating and a target price of Rs. 550 based on a multiple of 1.62x FY25 P/Bk, considering its healthy balance sheet, solid performance in distribution circles, and the expectation that the PLFs of the generating units would pick up.