Maharatna PSU NBFC company engaged in financing the power sector, REC Ltd has been under pressure for the past year. The start of January 2025 has also recorded significant correction, taking REC Ltd to below Rs 500 levels. Nonetheless, brokerages have recommended BUY on REC this month owing to its steady growth prospects and gradually improving asset quality dynamics.
REC Ltd Share Price:
After market hours of January 23, REC stock price closed at Rs 463.70 apiece on BSE, with a market cap of Rs 1,22,102.60 crore. From the latest CMP, the stock is about Rs 55.7 away from hitting its 52-week low of Rs 408 apiece, while the stock has corrected significantly from its 52-week high of Rs 653.90 apiece.
In January 2025 so far, REC shares have dropped by 8.25% as of January 23. Its weekly performance is also down by 4.2%, while in six months, the performance has plunged by a massive 23.30%.
REC Ltd Share Recommendation:
In a latest note, Vaishali Parekh, Vice President – Technical Research at Prabhudas Lilladher said, “The stock has witnessed a significant slide from the 200 period MA of 540 levels and has arrived near the base of the descending channel pattern on the daily chart and indicated a decent pullback to improve the bias. The RSI has indicated a pullback with a positive trend reversal to signal a buy and has much upside potential to carry on with the positive move further ahead. With the chart technically looking good, we suggest buying and accumulating the stock for an upside potential target of 495 and further 520 levels keeping the strict stop loss of 440 level.”
Meanwhile, Axis Securities said, “The steady growth prospects, gradually improving asset quality along with a strong power capex cycle, warrants further upside for REC from current levels. We recommend a BUY on the stock with a target price of Rs 530/share.”
In its investment rationale, Axis Securities highlighted three key factors for REC:
1. The company’s management aims to double its AUM to ~Rs 10 Lc Cr by or before 2030, with the share of renewable energy improving to ~30% of the portfolio mix. This aligns with India’s aim of achieving 500 GW of renewable capacity by 2030 and is also likely to drive market share improvement for the company. Additionally, in line with the Ministry of Power’s 80 GW coal-based capacity target by 2032, REC aims at capturing ~20% of the market share in the coal-based power plant business.
Axis believes REC has a strong growth run-way and expects the company to clock a strong AUM growth of ~18% CAGR over FY25-27E.
2. Axis also believes slippages over the medium term could remain under control, facilitating a further gradual improvement in asset quality. Thus, credit costs are expected to remain under check driving healthy earnings growth of ~14% CAGR over FY24-27E.
3. . The management expects to maintain the NIMs in the range of 3.5-3.75% with NIMs in FY25 at ~3.6%. Axis believes the marginal contraction in NIMs would be offset by the benign credit costs, thereby enabling REC to deliver steady RoA/RoE of 2.5-2.6%/20-21% over the medium term.
REC Ltd Dividends, Bonus:
This NBFC giant has not yet carried any stock split but holds a healthy record in dividends and bonus issues.
Bonus Issue: REC had rewarded investors with two bonus issues. The first bonus issue was 1:1 and its record date stood on September 29, 2016. While the latest and second bonus was of 1:3 ratio that took place in August 2022.
Dividends: Since September 2008, the company has distributed up to 39 dividends, as per Trendlyne data. In the last 12 months, the dividend payout was Rs 17 per share, while its current dividend yield is 3.67%. Notably, between 2022 to 2024, the company rewarded up to Rs 46.9 dividend per share in about 11 tranches including both interim and final dividends.
About REC:
REC is a ‘Maharatna’ company under the administrative control of the Ministry of Power, Government of India, and is registered with RBI as Non-Banking Finance Company (NBFC), Public Financial Institution (PFI) and Infrastructure Financing Company (IFC).
REC was incorporated in 1969 in the backdrop of severe drought and famine in the country, to energise agricultural pump-sets for irrigation purposes, thereby reducing the dependency of agriculture on monsoons. From its humble beginnings, REC has evolved and expanded its financing mandate to cover the entire Power-Infrastructure sector comprising Generation, Transmission, Distribution, Renewable Energy and new technologies like Electric Vehicles, Battery Storage, Green Hydrogen etc.
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