Torrent Power (TORNTPOWER)

FairStock Score: 60/100 — STEADY

Score breakdown: P/E: 1/3 · ROCE: 1/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• High return profile: ROE of 17.93% and ROCE of 15.95% for an integrated utility
• Solid growth history: 5-year revenue CAGR of 19.09% and 33.85% profit growth
• Financially healthy: D/E of 0.55, FCF of ₹1,155 Cr, Piotroski F-score of 8/9 and Altman Z-score of 3.07
• Promoter holding of 51.09% aligns majority and minority interests

Concerns

• Valuation is far above conservative estimates: Graham Number of ₹715.52 and DCF of ₹1,226.79 versus price of ₹1,737, implying a deeply negative margin of safety
• Latest sales growth is negative at -0.76%, making the 33.85% profit growth difficult to rely on
• EV/EBITDA of 130.21 is anomalous and hard to reconcile with the strong earnings and cash flow figures
• Dividend yield of only 1.21% provides thin income support at this valuation

AI Analysis

This is a good business in a necessary industry, but the price tests my discipline. Torrent Power earns an ROE of 17.93% and an ROCE of 15.95%—respectable for an integrated utility. The five-year revenue CAGR of 19.09% shows it has compounded nicely, and a 33.85% jump in profit with a ₹655 Cr quarterly net profit tells me the operating engine is working. The balance sheet is manageable: debt/equity of 0.55, free cash flow of ₹1,155 Cr, a Piotroski F-score of 8/9, and an Altman Z-score of 3.07 all suggest financial fragility is not the issue. Promoters own 51.09%, so their interests are aligned with mine. But Graham taught me that a great business can be a bad investment at too high a price. At ₹1,737, the P/E is 25 times and P/B is 4.97 times book value of ₹349.58. The Graham number—₹715.52—is less than half the market price, and even the DCF estimate of ₹1,226.79 is below today's quote. That leaves no margin of safety; we would be paying an enormous premium over conservative value. Also, while profit grew 33.85%, sales actually declined 0.76% in the latest year. That divergence needs to be understood before I trust it. The dividend yield is only 1.21%, so I am not being paid to wait. An EV/EBITDA of 130.21 looks out of line with the profitable picture and demands explanation. For a utility, this is not a cheap, sleepy holding; it is priced for flawless execution. If growth disappoints, the multiple will compress. I would wait for a better price or clearer proof that revenue growth has resumed.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer