PFC, REC jump 5% as CLSA upgrades to buy, raise targets | Ethical Research Stock Market Updates

CLSA believes that the capex in SEB/PSUs will provide space for mid-teen loan growth over 2-3 years.


Share price of Power Finance Corporation (PFC) and REC rose nearly 5 percent intraday on September 6 after global brokerage house CLSA upgraded the stocks from sell to buy.
According to CLSA, both companies have largely done with NPL recognition in the private sector and expects earnings rebound will begin in FY21 once the companies build coverage of 50 percent - 60 percent of NPLs.

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CLSA has raised target for PFC to Rs 150 from Rs 120 and REC to Rs 180 from Rs 160 per share. It expects that the capex in SEB/PSUs will provide space for mid-teen loan growth over 2-3 years. The risk comes from the supply of shares and on capital allocation.

The steady consolidation of SEB losses and tariff-hikes will be positive triggers, while valuations and dividend yields of 6-8 percent offer a favorable risk-reward.
At 0933 hrs, REC was quoting at Rs 147.20, up Rs 5.35, or 3.77 percent and Power Finance Corporation was quoting at Rs 108.20, up Rs 4.20, or 4.04 percent on the BSE.

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