On September 29, the BSE Power Index soared to a 10-year high, an on-demand rally of ~ 4% across India. The index rose 5.09% in one week, while it rose 10.8% in one month. On the other hand, it fell 1.27% in one week, but gained 3.93% in one month. As the industry opened up, the shares of power generation companies rallied on expectations of higher demand. In India, power generation and energy consumption are projected to improve in fiscal 2022 with the hope that the economic recovery driven by increased vaccination rates will normalize and accelerate. We picked up two stocks that have performed well and will continue to improve in the short term.
1. ABB India Ltd (NS ๐
ABB India Limited undertakes engineering and construction projects and manufactures heavy engineering and industrial equipment. The company's portfolio of project domains includes transportation, power production, process automation, power transmission, and pollution control. ABB India's products include pollution control equipment, high current switches and rectifiers. Today, ABB India's parent company ABB has launched the world's fastest electric car charger that can deliver 100km of range in less than three minutes. It is the only charger explicitly designed to charge up to four vehicles at a time. It is best suited for gas stations, urban charging stations, retail parking lots, and fleet applications. The company made a strong recovery, with a solid rebound after the June pandemic wave began to fade. ABB continues to see strong demand for its portfolio of products, solutions and services in its target market segments. Despite strong increases in raw material prices, the company's profitability remained strong, driven by operating efficiency. The current energy crisis in China bodes well for ABB's revenue growth in the future.
In the second quarter and first half of 2021, ABB's orders increased 41% for the quarter and 11% year-on-year for the first half of 2021. Its revenue increased 45% in the quarter and 22% year-on-year in the H1 2021. Profit after tax increased 308% in the quarter and 165% YoY in H1 2021. Operating EBITDA increased to Rs 88. crore in Q2 2021 from negative Rs 21 crore in Q2 2020. Shares of ABB India's subsidiary ABB Power Products and Systems India showed a further break from the range of Rs 2,275 to Rs 2,500. ABB India shares have a "buy" recommendation based on major technical parameters such as RSI, Momentum, 10-day / 20-day / 50-day / 100-day / 200-day EMA.
2. Torrent Power Ltd (NS ๐
Torrent Power Limited generates, transmits and distributes energy. The company also implements large energy projects in India. TPL entered into a share purchase agreement with CESC Limited (NS ๐ and others for the acquisition of 100% of CESC's wholly owned subsidiary, Surya Vidyut Limited and its 156Mw wind power plants spread across MP, Gujarat and Rajasthan. The power plants have had long-term power purchase agreements with the state power distribution companies of MP, Gujarat, Rajasthan and MP for 25 years. Second, in August, total energy demand in India soared 4% MoM or 18% YoY to 129BUsled โโdue to the strong recovery in industrial and commercial activities (driven by holiday demand). In particular, demand even exceeded the pre-covid level (23% more than in August 2019).
In Q1FY2022, Torrent Power's total revenue from operations grew 3.05% YoY to Rs 3,098.91 crore from Rs 3,007.05 crore in the corresponding quarter of fiscal 2021. However, profit after tax decreased 44 , 5% YoY to Rs 206.59 crore from Rs 372.66 crore. Vital technical indicators like RSI, MACD, 10-day / 20-day / 50-day / 100-day / 200-day EMA suggest a 'buy on the stock'. Based on the PE multiple of the peer group, the stock looks lucrative. TPL's stock is currently trading at a 9.6% discount to its 52-week high of Rs 527.35.
