On September 29, the BSE Power index soared to a 10-year high, up ~4% on-demand pick-up across India. The index surged 5.09% in a week, whereas the same gained 10.8% in a month. On the other hand, BSE Sensex plunged 1.27% in a week but gained 3.93% in a month. As the industry opened up, shares of power generation companies rallied on expectations of higher demand. In India, power generation and power consumption are anticipated to improve in FY2022 in hopes of normalization and expediting economic recovery driven by increased pace vaccinations. We picked up two stocks that have done well and will continue to do better in the near term.
1. ABB India Ltd (NS:ABB)
ABB India Limited undertakes engineering and construction projects and manufactures heavy engineering and industrial equipment. The company's portfolio of project domains includes transportation, energy production, process automation, power transmission, and pollution control. ABB India's products include pollution control equipment, switch gears, and high current 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 designed explicitly to charge up to four vehicles at once. It is most suitable for refueling stations, urban charging stations, retail parking, and fleet applications. The company posted a strong recovery, with a solid bounce back after June's pandemic wave started to fade. ABB continues to witness robust demand for its products, solutions, and services portfolio across its targeted market segments. Despite the sharp rise in commodity prices, the company's profitability remained resilient, driven by operational efficiencies. The current power crisis in China bodes well for ABB's top-line growth ahead.
In Q2 and H1 2021, ABB's orders up 41% for the quarter and 11% year-on-year for H12021. Its revenue was up 45% for the quarter and 22% year-on-year for H1 2021. Profit after tax was up 308% for the quarter and 165% for year-on-year for H1 2021. Operational EBITDA jumped to Rs 88 crore in Q2 2021 from negative Rs 21 crore in Q2 2020. ABB India's subsidiary—ABB Power Products and Systems India stock displayed a fresh breakout from the Rs 2,275- Rs 2,500 range. ABB India stock has 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:TOPO)
Torrent Power Limited generates, transmits, and distributes power. The company also implements large power projects in India. TPL entered into a share purchase agreement with CESC Limited (NS:CESC) and others for 100% acquisition of CESC's wholly-owned subsidiary Surya Vidyut Limited and its 156 Mw wind power plants spread across MP, Gujarat, and Rajasthan. The power plants have had long-term power purchase agreements with state power distribution companies of MP, Gujarat, Rajasthan, and MP for 25 years. Secondly, in August, overall power demand in India soared 4% month-on-month or 18% year-on-year to 129BUsled on account of robust recovery in industry activities and commercial (driven by festive demand). Most notably, demand even crossed above the pre-covid level (up 23% over August 2019).
In Q1FY2022, Torrent Power's total income from operations grew 3.05% year-on-year to Rs 3,098.91 crore from Rs 3,007.05 crore in the corresponding quarter of fiscal 2021. However, the profit after tax declined 44.5% year-on-year to Rs 206.59 crore from Rs 372.66 crore. Vital technical indicators such as RSI, MACD, 10-day/20-day/50-day/100-day/200-day EMA suggest a 'buy on the stock. Based on the peer group's PE multiple, the stock appears lucrative. TPL share currently trades at a 9.6% discount to its 52-week high of Rs 527.35.