Explore the potential trajectory of REC share price post-Q3 results. Gain valuable insights into the factors influencing investor sentiment and expert forecasts for REC’s future performance.
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REC Share Price: Government agencies are doing a great job. Maharatna company Rural Electrification Corporation (REC Ltd), which finances the power sector, gave a multibagger return of about 300 percent in the year 2023. Based on January 30, the stock is at Rs 490 (REC Share Price NSE). The company recently announced its Q3 results. Let’s know how its fundamentals are and whether long-term investors (PSU Stocks to Buy) can include it in their portfolio.
REC is a portfolio stock in every sense.
Talking about the strength of REC Ltd., the management is very experienced and has strong experience in the power financing sector. Top domestic rating. International rating agencies Moody’s and Fitch have given it a strong rating of “Baa3,” which is better than the sovereign rating. The fundamentals are great. Business models are flexible. The margin remains high. The NPA is very low. Assets are diversified. Power, and especially renewable energy, is a major beneficiary of the sector’s growth. The Maharatna status came in September 2023, which shows top performance.
The loan portfolio has been diversified.
The company has significantly diversified its loan portfolio. Apart from financing power sector projects, the company now finances healthcare, steel infrastructure, IT infrastructure, roads and highways, metro projects, ports and waterways, airports, and oil refinery projects.
There will be a huge benefit from the Suryoday Yojana.
Recently, Prime Minister Narendra Modi launched the Pradhan Mantri Awas Yojana (PMAY). Under this, rooftop solar panels will be installed on 1 crore houses across the country. The government has set a target of installing 40 GW of rooftop solar panels by 2026. REC has been appointed as the nodal agency by the Ministry of Renewable Energy.
Foreign investors are confident.
As of December 31, 2023, PFC holds 52.63 percent, FPIs and FIIs 20.60 percent, insurance companies 4.66 percent, and mutual funds 8.32 percent. The issue price is Rs 246 per share on book value and Rs 50.65 per share on earnings per share (EPS). Since its IPO in 2008, foreign investors have always held more than 20%.
The loan book is around Rs 5 lakh crore.
As of December 31, 2023, the total outstanding loan book of REC Ltd. is Rs 4.97 lakh crore. This includes Rs 4.50 lakh crore to states and Rs 47,435 crore to private sector borrowers. In the loan book, the share of power distribution projects is 43%, power generation projects are 29%, transmission projects are 10%, and renewable energy is 7%. The annual growth of the loan book is 18%.
NPAs are continuously falling.
Asset quality continues to improve. Gross NPAs stood at 2.78 percent in the December quarter as against 3.14 percent in the September quarter, 3.28 percent in the June quarter, 3.42 percent in the March quarter, and 3.63 percent in the December 2022 quarter. Net NPAs stood at 0.82 percent in the December 2023 quarter, 0.96 percent in the September quarter, 0.97 percent in the June quarter, 1.01 percent in the March quarter, and 1.12 percent in the December 2022 quarter. In terms of provision coverage, it was 70.41 percent in Q3 as against 69.37 percent in Q2 and 70.46 percent in the June quarter.
How was the company’s performance in the first nine months of FY24?
If we look at the performance of the company in the nine months of FY24, the total income was Rs 34571 crore, a jump of 19%. Net profit up 24% to Rs 10003 crore, loan book up 21% to Rs 4.97 lakh crore, net NPA up 0.82%, net worth up 18% to Rs 64787 crore, and capital adequacy up 28.21%. It is 1.25.35 percent and 2.2.86 percent, respectively.
REC Q3 Results
Net interest income stood at Rs 4153 crore, profit before tax at Rs 4114 crore, and profit after tax at Rs 3269 crore. The cost of funds stood at 7.28 percent, with a net interest margin of 3.61 percent, as against 3.55 percent a year ago. The return on net worth stood at 20.45 percent, as against 21.26 percent a year ago. Debt to equity was 6.65 times.
REC Share Price History
On January 30, the shares of REC closed at the level of Rs 490. The stock hit an all-time high of Rs. 512. The company has a market cap of Rs 1.3 lakh crore. On a closing basis, the stock has returned 13 percent in a week, 20 percent in a month, 75 percent in three months, 145 percent in six months, 325 percent in a year, 400 percent in three years, and 425 percent in five years.
Strong growth is expected in the coming years.
According to the RBI’s report on green financing, there will be a financing requirement of Rs 85.6 lakh crore between FY 23–30, which is Rs 10.7 lakh crore on an annual basis. This is a huge opportunity for the company. Based on December 31, 2023, the loan book of REC is Rs 4.97 lakh crore. It is expected to reach Rs 6 lakh crore by March 2025. The average growth of AUM between FY 24-28 is expected to be 16%, which is also the company’s guidance.
Renewable energy plan
REC Ltd. has issued guidance to increase AUM to Rs 10 lakh crore by FY 28–29. In this case, the share of renewable energy will be 30%, i.e., Rs 3 lakh crore. At present, its share is only 7%, i.e., Rs 33,000 crore. Between FY 13 and FY 23, the company cleaned up the balance sheet. Net NPA came down to 0.8 percent from 5.8 percent in FY2018. Provisioning reversal is expected in the fourth quarter, which will make the credit cost negative.
REC Share Price Target After Q3 Results: FAQs
- What were the key highlights of REC’s Q3 results? REC’s Q3 results showcased robust financial performance driven by steady revenue growth and profitability. The company’s strategic focus on renewable energy investments and sustainability initiatives contributed to its positive performance.
- How have investors responded to REC’s Q3 results? Investor response to REC’s Q3 results has been generally positive, reflecting confidence in the company’s strategic direction and growth prospects within the energy sector.
- What are expert forecasts regarding REC share price target post-Q3 results? Expert forecasts for REC share price target post-Q3 results vary, with some analysts projecting bullish trends based on strong financial fundamentals and REC’s focus on renewable energy investments.
- How do government policies impact REC share price outlook? Government policies, particularly those related to renewable energy adoption and infrastructure development, influence REC share price outlook by shaping market sentiment and investor confidence.
- Are there any upcoming catalysts that could impact REC share price? Potential catalysts such as new project announcements, policy developments, or regulatory reforms could impact investor sentiment and influence REC share price in the near term.
- What role does REC’s sustainability initiatives play in REC share price target? REC’s sustainability initiatives and investments in renewable energy projects enhance its attractiveness to investors, positioning the company for long-term growth and potentially impacting its share price target positively.
Conclusion: Charting the Course Ahead
As investors assess REC’s Q3 performance and its implications for future growth, expert forecasts and market dynamics will shape the trajectory of its share price. By staying informed about sectoral trends, regulatory developments, and REC’s strategic initiatives, investors can make informed decisions regarding their investment in REC.