CLSA has reiterated its Outperform rating on REC, with a target price of ₹680, indicating a potential upside of approximately 32.6% from the current market price of ₹513.00.
Key Insights from CLSA’s Report
- Q2 Net Profit Beat: REC’s Q2 net profit came in at ₹40 billion, exceeding estimates by 9%, largely due to negative credit costs.
- Loan Growth Driven by Key Segments: Loan growth was a robust 16% YoY, primarily driven by the renewable energy, infrastructure, and discom segments.
- Sustained NIM: REC’s Net Interest Margin (NIM) has been above 3.6% for four consecutive quarters, with a slight increase of 2 basis points QoQ.
- Provision Coverage and Credit Costs: ECL provision coverage on stage 3 assets declined by 3.4 percentage points, contributing to a marginally negative credit cost of -0.1% (annualised).
- Positive Outlook on Resolutions: Management indicated progress on resolutions for Nagai Power and TRN Energy, which could further support financial stability.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should consult their financial advisors before making investment decisions.
