Hold Torrent Power Ltd For Target Rs.389 - Sushil Finance
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Torrent Power Ltd. has reported numbers for the quarter ended December’20. Following are the highlights of the result.
Highlights from the Quarter (Q3FY21):
Net Sales for Q3FY21 stood at Rs. 2,952.75 Cr as against Rs. 3,079.00 Cr in Q3FY20 (down by 4.1% YoY) and against Rs. 3,128.73 Cr in Q2FY21 (down by 5.6% QoQ). Economic revival in Torrent’s distribution areas has resulted in an increase in demand for electricity and the demand has almost reached the pre-covid levels in all distribution areas of the company.
EBITDA for the quarter stood at Rs. 907.64 Cr as against Rs. 876.86 Cr in the corresponding quarter last year (increase of 3.5% YoY) and against Rs. 748.49 Cr in the previous quarter (increase of 21.3% QoQ). The EBITDA margin for Q3FY21 was 30.74% against 28.48% in Q3FY20 (up by 226 bps) and against 23.92% in Q2FY21 (up by 682 bps) on account of improvement in operations and rising collection efficiencies in franchised distribution areas. The contribution from renewable generation improved as more capacities were added. Improvement in Profit before Tax was on account of reduction in interest expense due to lower debt and reduction in interest cost. Net Income for Q3FY21 was Rs. 321.73 Cr as against Rs. 420.62 Cr in Q3FY20 (decrease of 23.5% YoY) and against Rs. 202.17 Cr in the previous quarter (increase of59.1% QoQ).
Outlook and Valuation
With resumption in economic activity in its distribution areas, Torrent Power has seen its operations normalize. Subsequently the margins have also moved closer to the pre-covid levels, and while T&D Losses and Collection Efficiencies haven’t reached pre-covid levels yet, they have improved from the previous quarters. The Q3FY21 numbers were slightly better than our expectations therefore we maintain our outlook for Torrent Power, keeping our estimates unchanged. With the increase in the share price, we revise our rating to HOLD for the company with a target price of Rs.389 which is an upside of ~17% from the current price of Rs.332 over an investment horizon of 12-18 months.
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