REC, PFC shares are now high-conviction outperformers, CLSA says; check new price target

Power financier stocks Power Finance Corporation (PFC) and REC Ltd., are now part of brokerage firm CLSA’s high-conviction outperform list. The brokerage added these two names to the list from its earlier rating of “outperform”.However, it cut its price target by up to 11% on these stocks.

CLSA has cut its price target on PFC to ₹525 from ₹590 earlier, while PFC’s target has been cut to ₹525 from ₹540 earlier. Yet, the revised price targets imply a potential upside of up to 45% each for both these stocks.

For PFC, the brokerage said the company’s existing pipeline of 59% undisbursed sanctions will support its double-digit growth. The firm’s ghosts of past bad assets is now nearly behind and the outlook on new disbursals is better, it added.The brokerage said the company has the best delivery on loan growth, return on equity and dividend yields. It still trades 0.76x times financial year 2027 price-to-book.

CLSA said 55% of REC’s sanctions are undisbursed and this pool alone implies double-digit growth. It said the company has not witnessed any slippage for more than two-and-a-half years and the outlook on the new disbursals is better. It said the company has the best-in-class delivery and a strong track record of senior management.On Friday, February 28, the brokerage had maintained its ‘outperform’ rating on the two stocks.

All 12 analysts with coverage on both REC and PFC have “buy” ratings on them.

PFC shares ended the previous trade session 3.46% lower at ₹365 apiece and REC shares ended 4.36% down at ₹362 apiece.

PFC shares were trading 1.67% higher at ₹370.6 apiece and REC shares were up 1.32% at ₹365.05 apiece at 9.35 am

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