Torrent Power: Long Term Buy Call
During an interview Mr. Amitabh Chakraborty of Religare Securities said that the companies must perform well in the quarterly results in order to keep their stock valuations high. As per view of Mr. Chakraborty, stock valuations have seen a tremendous rise in last 3 months of year 2007. A net profit increase of 20 – 30 % has already been factored in the stock prices. So, companies need to perform better than this to outperform the market.
Companies with a good track record and positive guidance for future will perform well in the year 2008. Mr. Amitabh said that they are positive on Power Sector stocks including Torrent Power, Tata Power and Gujarat Industrial Power.
Things have changed quite fast in the stock markets after the recent crash. Stock valuations have tumbled and there are many stocks which are looking good for long term investment. Torrent Power has been recommended by StockWatch team long time back. We still maintain a buy for the stock. The stock is currently trading in 155 – 175 range.
Investors can accumulate the stock with a medium term target of Rs 195. For long term, the target for Torrent Power is Rs 235.
The stock was recommended by Technical Analyst Mr. Vijay Bhambwani on 7th of January, 2008. Technical Expert Mr. Vikas Sethi of Sethi Finmart has also recommended a hold for the stock at Rs 220 in first week of January. Mr. Sethi had suggested a strong support for Torrent Power at Rs 165.
After the recent stock market correction, we will suggest a stop loss of Rs 125 for Torrent Power. The company has strong fundamentals and Power Sector will outperform the Sensex in year 2008.