Investment Manager's Insight: REC Ltd (RECL:IN) Receives Buy Rating with Price Target of INR630.00
Motilal Oswal Securities has initiated coverage on REC Ltd, a leading public sector power and infrastructure asset finance company, with a Buy rating and a price target of INR630.00. The firm emphasized REC's strong presence in the power value chain, particularly in distribution and generation sectors.
As of June 2024, REC's loan distribution showed a significant focus on the public sector, with distribution and power generation accounting for 41% and 28% of the portfolio, respectively. Private sector loans made up only around 11% of the total. The company has been actively financing renewable energy and infrastructure projects, leading to a growing share of these segments in its sanction mix.
Analysts believe REC is well-positioned to benefit from the current power upcycle, driven by investments in power generation and transmission. This favorable environment is expected to support REC's loan growth in the coming years.
Moreover, the analysis of REC's asset quality indicates a positive outlook, similar to that of Power Finance Corporation (PFC). Both companies are projected to address their stressed assets, resulting in significantly lower credit costs over the next two to three years.
In conclusion, REC Ltd's promising outlook and strategic positioning in the power and infrastructure sectors make it an attractive investment opportunity for investors seeking exposure to these industries.
Analysis:
- Motilal Oswal Securities initiates coverage on REC Ltd with a Buy rating and INR630.00 price target.
- REC's loan distribution is focused on the public sector, with significant exposure in distribution and power generation.
- The company is actively financing renewable energy and infrastructure projects.
- REC is well-positioned to benefit from the current power upcycle.
- Positive outlook on asset quality with lower credit costs expected in the future.
- REC presents a compelling investment opportunity in the power and infrastructure sectors.