MarketsMOJO Upgrades Torrent Power Ltd. to Buy on Improved Technicals and Valuation

Quality Assessment: Steady Fundamentals Amid Sector Challenges

Torrent Power operates in the power generation and distribution industry, a sector characterised by steady demand but also regulatory and operational challenges. The company maintains a robust quality profile, supported by a Return on Capital Employed (ROCE) of 13.48% and a Return on Equity (ROE) of 15.90% as per the latest financials. These figures indicate efficient capital utilisation and profitability relative to equity, signalling sound operational management.

Institutional investors hold a significant 39.4% stake in Torrent Power, reflecting confidence from sophisticated market participants who typically conduct rigorous fundamental analysis. This institutional backing adds to the company’s quality credentials, suggesting a stable shareholder base and reduced volatility risk.

However, the company’s recent quarterly results for Q3 FY25-26 showed flat financial performance, which tempers the quality outlook slightly. Key operational metrics such as the Debtors Turnover Ratio at 8.35 times and cash and cash equivalents at ₹304.12 crores are at their lowest half-yearly levels, indicating some short-term liquidity and operational pressures. Despite these, the long-term growth trajectory remains healthy, with net sales growing at an annualised rate of 19.17%.

Valuation: From Expensive to Fair – A More Attractive Entry Point

One of the pivotal reasons for the upgrade is the shift in valuation grade from expensive to fair. Torrent Power’s current Price-to-Earnings (PE) ratio stands at 23.70, which is notably lower than several peers in the power sector. For instance, JSW Energy trades at a PE of 36.62, NHPC Ltd at 24.38, and SJVN at 48.20, all classified as very expensive by MarketsMOJO standards.

Other valuation multiples reinforce this fair valuation stance. The Enterprise Value to EBITDA ratio is 15.09, and the Enterprise Value to Capital Employed ratio is a modest 3.05, indicating that the stock is reasonably priced relative to its earnings and capital base. The PEG ratio of 0.70 further suggests that the stock’s price growth is undervalued relative to its earnings growth, which has been robust at 33.9% over the past year.

Dividend yield remains modest at 1.01%, consistent with the company’s reinvestment strategy to fuel growth. Overall, these valuation metrics position Torrent Power as an attractive investment relative to its sector peers, justifying the upgrade to a Buy rating.

Financial Trend: Consistent Long-Term Growth Despite Recent Flat Quarter

While the latest quarter showed flat financial results, Torrent Power’s longer-term financial trend remains positive. The company has delivered a compound annual growth rate in net sales of 19.17%, reflecting steady expansion in its core business. Profit growth over the past year has been impressive at 33.9%, signalling operational leverage and margin improvement.

Returns have been consistently strong relative to the broader market. Torrent Power’s stock has generated a 19.70% return over the last year, outperforming the Sensex’s 9.81% return in the same period. Over three years, the stock’s cumulative return of 192.95% dwarfs the Sensex’s 36.80%, and over five and ten years, the outperformance is even more pronounced at 331.80% and 574.82% respectively, compared to Sensex returns of 61.40% and 256.90%.

These figures highlight the company’s ability to deliver shareholder value over multiple market cycles, reinforcing confidence in its financial trajectory despite short-term fluctuations.

Technicals: Bullish Momentum Drives Upgrade

The most significant driver behind the recent upgrade is the marked improvement in technical indicators. Torrent Power’s technical grade has shifted from sideways to bullish, signalling positive momentum in the stock price and investor sentiment.

Key technical signals include a bullish Moving Average Convergence Divergence (MACD) on the weekly chart, supported by bullish Bollinger Bands on both weekly and monthly timeframes. Daily moving averages also confirm an upward trend, while the Know Sure Thing (KST) indicator is bullish weekly, though mildly bearish monthly, suggesting some caution in the longer term.

Other indicators such as the Relative Strength Index (RSI) show no significant overbought or oversold signals, implying room for further price appreciation. The On-Balance Volume (OBV) indicator is bullish monthly, indicating accumulation by investors. Dow Theory analysis shows a mildly bullish monthly trend, although weekly trends remain neutral.

On 18 Feb 2026, Torrent Power’s stock price closed at ₹1,484.95, up 0.78% from the previous close of ₹1,473.45, with intraday highs reaching ₹1,494.25. The stock remains comfortably above its 52-week low of ₹1,188.00 and is trading below its 52-week high of ₹1,640.00, suggesting potential upside.

Comparative Industry Position and Risks

Within the power generation and distribution sector, Torrent Power’s valuation and returns profile stands out favourably. Compared to peers such as JSW Energy, NHPC Ltd, and SJVN, Torrent Power offers a more balanced risk-reward proposition with fair valuation and solid growth metrics.

Nonetheless, investors should be mindful of certain risks. The recent flat quarterly results and the lowest half-yearly ROCE of 14.21% indicate some operational headwinds. Additionally, the company’s cash and cash equivalents have declined to ₹304.12 crores, which could constrain liquidity. The Debtors Turnover Ratio at 8.35 times, while still healthy, is the lowest in recent periods, potentially signalling slower collections.

These factors warrant monitoring, but the overall upgrade reflects confidence that Torrent Power’s fundamentals and technical momentum outweigh these near-term concerns.

Conclusion: A Balanced Buy Recommendation Backed by Data

MarketsMOJO’s upgrade of Torrent Power Ltd. from Hold to Buy is a data-driven decision grounded in improved technical momentum, fairer valuation metrics, consistent long-term financial growth, and solid quality fundamentals. The company’s stock has outperformed the broader market significantly over multiple time horizons, and current technical indicators suggest further upside potential.

While some short-term financial metrics have softened, the company’s strong institutional backing and sector positioning provide a cushion against volatility. Investors seeking exposure to the power sector with a blend of growth and reasonable valuation may find Torrent Power an attractive addition to their portfolio at current levels.

Unlock special upgrade rates for a limited period. Start Saving Now →