REC Limited, a state-run non-banking financial company, has posted a 6.5% year-on-year (YoY) increase in consolidated net profit for the second quarter of FY25, rising to ₹4,038 crore from ₹3,790 crore in the same period last year. The company’s total interest income surged by 18% YoY, reaching ₹13,485 crore, driven by robust loan growth in key sectors like renewable energy, infrastructure, and discoms.
REC’s Net Interest Margin (NIM) hit an 8-quarter high, staying above 3.6% for four consecutive quarters, with a slight 2 basis points QoQ increase. The company’s loan disbursements rose by 13.7% YoY, underlining strong demand from its core segments.
Additionally, REC announced an interim dividend of ₹4 per equity share for FY25, with the record date set for November 8.
Brokerage Outlook:
- CLSA reiterated an Outperform rating on REC, with a target price of ₹680, indicating a potential upside of 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 of ₹40 billion exceeded estimates by 9%, driven by lower credit costs.
- Loan Growth: Loan growth was a strong 16% YoY, with significant contributions from renewable energy, infrastructure, and discom sectors.
- Provision Coverage: ECL provision coverage on stage 3 assets decreased by 3.4 percentage points, resulting in a negative annualized credit cost of -0.1%.
- Positive Outlook: Management shared progress on resolutions for Nagai Power and TRN Energy, which are expected to support future financial stability.
REC’s sustained NIM, loan growth, and improved profit margins continue to highlight its strong financial performance, with analysts expecting further upside.
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