TORNTPOWER - Investment Analysis: Buy Signal or Bull Trap?

Last Updated Time : 19 Sept 25, 2:16 pm

Investment Rating: 4.0

Here’s a detailed analysis of Torrent Power Ltd (TORNTPOWER) as a long-term investment

📊 Fundamental Analysis

Valuation

P/E Ratio: 24.8 vs Industry PE of 21.6 — slightly overvalued but not excessive.

PEG Ratio: 0.45 — attractive, indicating undervaluation relative to expected earnings growth.

Price to Book: ~3.71 — reasonable for a utility company with strong profitability.

Profitability

ROCE: 17.4% and ROE: 19.3% — solid metrics, indicating efficient capital deployment and strong shareholder returns.

EPS: ₹52.2 — supports earnings quality.

Quarterly PAT Decline: -26.2% — recent dip, but not structurally alarming.

Dividend Yield: 1.48% — modest, adds income cushion.

Debt to Equity: 0.37 — healthy leverage, manageable for infrastructure-heavy operations.

📈 Technical & Trend Indicators

DMA 50 / DMA 200: ₹1,315 / ₹1,403 — current price is below both, indicating bearish momentum.

RSI: 49.3 — neutral zone, no strong momentum.

MACD: -14.1 — bearish crossover, short-term weakness.

Volume: Above average — strong participation.

52W Index: Trading at ~9% of its 52-week high — deep correction phase, potential value zone.

📌 Market Sentiment & Forecast

Analysts forecast a modest EPS growth of 4.8% annually over the next 3 years, below market average

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Despite strong historical returns (+346% over 5 years), the stock is currently in a bearish long-term trend

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Average analyst target price: ₹1,388 — ~8% upside from current levels

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💡 Ideal Entry Price Zone

Entry Zone: ₹1,200–₹1,260

This range aligns with recent lows and offers a favorable risk-reward ratio.

Avoid entering above ₹1,350 unless earnings growth outlook improves.

🧭 Exit Strategy / Holding Period

If you already hold TORNTPOWER

Holding Period: 3–5 years — suitable for compounding returns and sector stability.

Exit Strategy

Fundamental Trigger: Exit if ROE drops below 15% or PEG rises above 1.2 for 2+ quarters.

Technical Trigger: Consider trimming if price nears ₹1,900–₹2,000 without earnings support.

Re-entry: If price dips near ₹1,200 with improving profitability and volume support.

🧠 Final Verdict

Torrent Power is a solid long-term candidate with strong fundamentals, reasonable valuation, and healthy dividend yield. While short-term technicals are weak, its PEG ratio and ROE/ROCE make it attractive for patient investors seeking value in the utilities space.

Sources

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simplywall.st

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stockpricearchive.com

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www.indmoney.com

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