Market Price Rs 154 (FV 10) Analyst : Janak Shah (M.B.A. Finance)
Market Cap Rs 7311 crs Date: 11th Sep 2015
Target : Rs 200 Time frame : 1 year target
About the Company:
The company was recommended at Rs 100 on 18th July 2013. The company was formerly known as Ahmedabad Electric Company and the Torrent Pharma group acquired it and the name was changed to the present one Torrent Power Limited. There has been a mark improvement in the recoveries and the capacity utilization over the years. The company has not performed since some years as it was facing shortage of gas supply and now it is at a very good level to enter it as the valuations are mouth watering. The changes in the fuel allocation policy by the government will help revive the power sector and Torrent Power.
The company supplies power to Ahmedabad and the neighbouring areas of Ahmedabad. It enjoys a monopoly in the market and has over 3 million customers. It has installed various anti power theft meters in all the locations and there is no power theft now due to which the revenue is achieved in full. The company has the SUJAN power plant in Surat. There is an additional power plant which has recently been commissioned that is Dahej South Gujarat of 1200 MW. This makes the total installed capacity of 3253 MW.
The company has a book value of Rs 147 and is currently quoting at just above its book value. The dividend this year was Rs 1.5 per share. For 2010-11, 2011-12, 2012-13 the company has seen revenues of 6834crs, 7917 crs and 8129 crs respectively and net profit have been 1065 crs, 1237 crs and 384 crs. In the year 2013-14 and 2014-15, the Net profit seen was 95 crores and 742 crores. The current year the company is seen getting gas @ 35% for all the gas plants and it might report Net Profit of more than 1100 crores.
The Gas prices are currently down and and this is good news as the gas prices are raw material for power companies. Also there are reports that by 2018, the gas shortage issues will be completely solved and if the company gets 100% gas then the profits will be huge. The company has a dividend distribution policy of 30% of net profits.
Promoters hold about 53.44% while the Fi’s hold about 3.62% , Dii hold 21.88% with public holding at about 21.66%.
Comparisions to Peers:
There are few good companies like Adani Power, Tata Power, JSW Energy, CESC etc which are all quoting between a PE of 10 to 15. Torrent power has lowest debt among peers.
The power industry is suffering a lot due to the fuel uncertainties. We can see it in the share prices and the results of the companies. The government has given several indications that the coal and fuel problems will have a solution soon. In the longer run the company is poised to do well. The company has 3 million customers which will keep on growing. The recent statement by Mr Sudhir Shah that all the gas plants will operate at 35% capacity from June to Sep 2015 quarter. He had further added that due to the bidding processes, Torrent power will try to keep winning gas in the future too. This will brighten the future. Shri Sudhirbhai has also indicated that Rs 1000 cr debt will be repaid so after that company will have debt of Rs 8500 crores.
The share presently quoting at Rs 154 can easily cross 200 in the next 1 year and if kept longer can become a multibagger if the gas issues are fully solved.
( Disclosure: The analyst has holdings in the company as on date of issue being published)
The analyst has submitted all information as per SEBI requirement for the criteria of a research analyst