Torrent Power stock nears 5-month low; down 17% in Nov on poor Q2 show

Torrent Power shares slipped 5 per cent to Rs 1,507 and were trading at the lowest level since July 25, 2024.

Torrent Power shares slipped 5 per cent to Rs 1,507 and were trading close to a 5-month low on the BSE in Friday’s intra-day trade in an otherwise firm market. The stock of the power utility company was trading at its lowest level since July 25, 2024. In comparison, the BSE Sensex was up 0.79 per cent at 77,754 at 10:24 am. Torrent Power has corrected 26 per cent from its 52-week high of Rs 2,037 touched on October 22.

 

Thus far in the month of November, the stock price of Torrent Power has declined 17 per cent after the company reported a disappointing financial performance for the second quarter of the financial year 2024-25 (Q2FY25). The company reported a 9 per cent year-on-year (YoY) decline in net profit at Rs 496 crore for Q2FY25. However, the company saw a 3.1 per cent rise in revenue, which grew to Rs 7,176 crore from Rs 6,961 crore a year ago. 

 

Operating earnings or earnings before interest, tax, depreciation, and amortisation (Ebitda) declined 1.2 per cent to Rs 1,207.3 crore, while Ebitda margins narrowed to 16.8 per cent from 17.6 per cent in Q2FY24.

 

The lower profit during the quarter was due to lower contribution from thermal generation mainly on account of reduced sale of merchant power (including sale of liquefied natural gas (LNG)) due to lower electricity demand in the current quarter on account of extended and heavy monsoon against comparable quarter last year. 

 

The lower contribution from renewable businesses was due to lower plant load factor (PLF) on account of inclement weather conditions and partial commissioning of solar project under stabilisation period; increase in finance & depreciation costs due to capex & commissioning of additional renewable generation capacity.

 

The company currently has 3,225MW of renewable energy (RE) capacity in pipeline with a total expected project cost of Rs 19,300 crore. It has identified 8.4GW of pumped storage projects, which are in the planning stage across Maharashtra and UP. A pilot hydrogen blending green hydrogen project in UP is nearing completion. TPW has been allocated 18 KTA of green hydrogen production capacity under the PLI scheme at ~Rs 28.9/kg.

 

Analyst at Elara Capital raised SOTP based-target to Rs 1,324 from Rs 1,166 on the back of a healthy project pipeline, huge capex plan and foray into new businesses, such as green hydrogen and pumped storage. However, the brokerage firm retained the 'Sell' rating based on rich valuation.

 

Meanwhile, considering the projected electricity demand compared to the current power supply position, thermal power plants are expected to operate at higher PLF. Gas-based plants play a crucial role in balancing renewable energy intermittency and flexibility to meet peak demand. With government’s strategic push toward a ‘gas-based economy’; despite geopolitical tensions affecting gas prices, the medium to long-term outlook for gas-based plants remains positive. Additionally, range-bound LNG prices further support improved PLFs, Torrent Power said.