Recent Price Performance and Market Context
Reliance Power’s stock has outperformed its sector and the broader market in the short term. Over the past week, the share price surged by 12.70%, contrasting sharply with the Sensex’s marginal decline of 0.40%. This recent rally is underscored by a three-day consecutive gain, during which the stock appreciated by 10.01%. On 18-Dec, the stock reached an intraday high of ₹39.39, marking a 10.31% increase from the previous close, and traded within a wide range of ₹3.69, signalling active trading interest.
Despite this short-term strength, the stock’s longer-term performance remains subdued. Over the past year, Reliance Power has declined by 15.62%, underperforming the Sensex which gained 5.36% in the same period. Year-to-date, the stock is down 11.16%, while the benchmark index has advanced 8.12%. However, the company’s three- and five-year returns have been impressive, with gains of 139.30% and 959.10% respectively, far outpacing the Sensex’s 37.73% and 79.90% over those periods.
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Strong Quarterly Results Drive Optimism
The recent price appreciation is largely attributable to Reliance Power’s very positive financial results declared in September 2025. The company reported a remarkable 95.43% growth in net profit, with quarterly PAT soaring to ₹87.32 crores—a staggering 6859.7% increase compared to the previous four-quarter average. This surge in profitability has been sustained over three consecutive quarters, signalling improving operational efficiency and earnings momentum.
Additionally, the company’s return on capital employed (ROCE) reached a half-year high of 6.49%, while the operating profit to interest coverage ratio stood at 1.56 times, indicating enhanced ability to service interest expenses. The valuation metrics also appear attractive; with a ROCE of 4.8 and an enterprise value to capital employed ratio of 1, the stock is trading at a discount relative to its peers’ historical averages. The company’s PEG ratio of 0.5 further suggests undervaluation given its profit growth of 115.4% over the past year.
Investor Participation and Liquidity
Investor interest has visibly increased, as evidenced by a 71.9% rise in delivery volume to 2.72 crore shares on 17-Dec compared to the five-day average. This heightened participation supports the recent price gains and reflects growing confidence among market participants. The stock’s liquidity remains adequate, with a trading capacity of approximately ₹4.79 crores based on 2% of the five-day average traded value, facilitating sizeable trades without significant price impact.
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Lingering Concerns Temper Enthusiasm
Despite the recent rally and encouraging earnings, some fundamental weaknesses persist. The company’s long-term operating profit growth has been negative, with a compound annual growth rate of -7.14% over the past five years. Moreover, Reliance Power’s ability to service debt remains constrained, reflected in a high debt to EBITDA ratio of 9.83 times. The average return on equity is a modest 0.49%, indicating limited profitability relative to shareholders’ funds.
Another cautionary note is the relatively low stake held by domestic mutual funds, which own just 0.96% of the company. Given their capacity for detailed research, this small holding may suggest reservations about the company’s valuation or business prospects. This scepticism is mirrored in the stock’s underperformance relative to the broader market over the last year, despite the company’s profit growth.
Conclusion: A Stock in Transition
Reliance Power’s recent price rise on 18-Dec is primarily driven by strong quarterly earnings, improved operational metrics, and increased investor participation. The stock’s attractive valuation compared to peers and its short-term momentum have further supported gains. However, investors should weigh these positives against the company’s weak long-term profit growth, high leverage, and subdued institutional interest. While the stock shows signs of recovery and potential, cautious appraisal remains prudent given the mixed fundamental backdrop.
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