Multibagger Stock: Torrent Power records 240% surge in 17 months, zooms 525% in 5 years

Investors of power-related stocks have enjoyed a remarkable run over the past few months. Bolstered by strong market fundamentals, increasing demand for renewable energy, and favorable government policies, these stocks have experienced significant gains. One standout in this category is Torrent Power, one of the largest companies in the country’s power sector.

In the last four sessions, Torrent Power shares gained nearly 10% after the BJP came to power for the third consecutive time, albeit this time as a coalition government for the first time in ten years. Analysts anticipate policy continuity and ongoing infrastructure investments under the potential third term of Prime Minister Narendra Modi.

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Investors remain optimistic about the government's focus on enhancing the power sector, a cornerstone of its development agenda. This positive outlook, coupled with the company's strong order wins and improved fundamentals, has driven the stock to new heights in recent months. From a trading price of ₹449 apiece in January 2023, the shares have surged 240% to the current price of ₹1,531 apiece.

Over the last five years, the stock has returned over 525%. In the last decade, it has delivered an astounding 1151% return.

Steady order wins

Torrent Power is strategically focusing on renewables to increase its generation capacity, aligning with its sustainability commitments and the government's aim to achieve 500 GW of non-fossil fuel capacity by 2030. The company operates across the entire power value chain—generation, transmission, and distribution.

This year, Torrent Power secured a notable renewable energy project, receiving a letter of award from its 'Distribution Unit' to set up a 150 MW wind-solar hybrid project with an investment of ₹1,825 crore in March. 

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This marks the second consecutive order win for its 'Distribution Unit' in under a month, following the acquisition of a letter of award for a 300 MW grid-connected wind-solar hybrid project valued at ₹3,650 crore.

Additionally, Torrent Power secured an order from Maharashtra State Electricity Distribution Co. Limited (MSEDCL) worth ₹1,540 crore. In February, the company also received a letter of award from Railway Energy Management Company Limited (REMCL) for establishing grid-connected renewable power projects. 

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This venture involves installing approximately 325 MW of renewable capacity for the supply of 100 MW of RE-RTC power, valued at ₹2,700 crore. Investors responded positively to these order wins, as evidenced by the 64% rally in share price in CY24 so far.

The company has an aggregate installed generation capacity of 4,328 MWp comprising 2,730 MW of gas-based capacity, 1,236 MWp of renewable capacity, and 362 MW of coal-based capacity. Further, renewable projects of 3,041 MWp are under development. 

Total generation capacity, including projects under advanced stages of development, is 7,369 MWp, as per the company's recent exchange filing. 

Meanwhile, the company has also set ambitious plans for green hydrogen projects. The first pilot project on green hydrogen is being developed in Uttar Pradesh with the blending of green hydrogen with gas in the city gas distribution network in Gorakhpur.

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Group market cap doubles in a year

The rally in shares has propelled the group's market capitalisation to USD 20 billion ( ₹1.68 lakh crore) in the previous trading session, nearly doubling the market value in just a year. 

The steady growth in the group's market capitalisation reflects robust financial performance, a sustained growth trajectory, and business expansions across verticals. Central to this growth strategy is a business model driven by acquisitions.

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The group has already implemented a succession plan, with the third generation of founder UN Mehta, assuming prominent leadership roles across the businesses, PTI reported. 

In terms of financial performance, the company reported a 33% increase in net profit to ₹1,656 crore for the fiscal year 2023–24, with revenue growth of over 12% to ₹10,728 crore.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.