PFC, REC shares extend gains as Morgan Stanley initiates coverage with overweight rating
Morgan Stanley initiated coverage on REC and PFC with an 'overweight' rating, citing attractive valuations, strong loan growth, and stable asset quality. The brokerage set target prices of Rs 508 for PFC and Rs 485 for REC.
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Shares of power sector financing majors REC Ltd and Power Finance Corporation (PFC) gained further momentum in Thursday's trade, following a bullish note from Morgan Stanley, which initiated coverage on both stocks with an 'overweight' rating.The global brokerage highlighted attractive valuations, robust loan growth, and stable asset quality as key factors behind its positive outlook for the two state-owned financial institutions.In intraday trade, PFC shares climbed 1.5% to Rs 434, pushing its market capitalisation to Rs 1,42,811 crore, while REC rose 1% to Rs 401, with a market cap of Rs 1,05,065 crore.Morgan Stanley has set a target price of Rs 485 for REC and Rs 508 for PFC, suggesting a potential upside of 22% and 18%, respectively, from their previous closing prices.'PFC and REC should each achieve 12% F25-28e loan CAGRs and 17-19% average ROE,' Morgan Stanley said in a note titled India Financials | PFC and REC: Attractive entry point; initiate with OW.Morgan Stanley said it expects both PFC and REC to deliver compound annual loan growth of 12% between FY25 and FY28, along with an average return on equity (ROE) of 17–19%.'At a F27e P/E of 5-6x for self-sustaining low-mid teens loan growth and a 3.8-4.5% dividend yield, with asset quality likely to be stable, we find risk-reward compelling vs. our coverage,' the brokerage said.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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