1 week ago
Bernstein Sees 37–41% Upside for PFC, REC Shares
Bernstein is a brokerage that studies companies and their shares.
It believes shares of PFC and REC could rise by about 37% to 41%.
However, both companies have recently faced weaker growth in their lending businesses.
Banks are competing more strongly for power-sector loans.
Renewable-energy projects are also facing transmission limits, while more projects are moving into areas where PFC and REC have less presence.
State electricity companies, called DISCOMs, are becoming financially healthier and may need less borrowing.
Bernstein still thinks the companies have strong asset quality, meaning their loans are generally being repaid well.
But it says investors should watch whether loan growth improves in the next few quarters.
Bernstein retained a positive view on PFC and REC despite recent weak loan-book growth.
PFC’s loan book declined 2% sequentially, while REC’s grew 1% in the June quarter.
The brokerage said bank competition, transmission constraints and improving DISCOM finances were limiting growth.
Renewable lending competition has intensified, with banks reportedly offering loans at around 8% for some projects.
Bernstein said asset quality remained strong but warned that credit costs could gradually rise as reversals fade.
- Who
- Bernstein, PFC and REC.
- What
- Bernstein retained a positive view on PFC and REC while identifying slower loan-book growth and rising competition as key concerns.
- Where
- The companies operate in India’s power-finance and electricity-distribution sectors.
- When
- The assessment refers to the June quarter, FY25 and YTD FY27; the articles do not provide a specific publication date.
- Why
- Loan growth has weakened because of stronger bank competition, transmission constraints affecting utility-scale renewables and improving DISCOM finances.
Growth and valuation concerns
Positive investment case
Loan-book growth
Growth and valuation concerns
PFC and REC have recently reported weak growth, with PFC’s book shrinking sequentially and REC’s expanding only slightly.
Positive investment case
The brokerage still sees substantial upside in both stocks and retained its positive view.
Competitive pressure
Growth and valuation concerns
Banks have become more active in power-sector lending, including refinancing some existing PFC-REC loans, while offering competitive rates to renewable projects.
Positive investment case
PFC and REC continue to have strong asset quality, which supports the case for their lending franchises.
Future credit performance
Growth and valuation concerns
Credit reversals are largely over, so credit costs may gradually emerge and weigh on earnings.
Positive investment case
Bernstein said it had limited concerns about asset quality in the near to medium term.
Key facts
- Brokerage view
- Bernstein retained a positive view on PFC and REC.
- Estimated upside
- The headline cites potential upside of 37% to 41% for the two stocks.
- PFC loan-book change
- PFC reported sequential loan-book degrowth of 2% in the June quarter.
- REC loan-book change
- REC reported sequential loan-book growth of 1% in the June quarter.
- Asset quality
- Bernstein said asset quality remained strong and expressed limited near- to medium-term concerns.
- Main growth drag
- The DISCOM and renewable segments were identified as the biggest drags on loan-book growth.
- Credit costs
- Bernstein said the credit-reversal phase was largely over and credit costs could gradually begin to rise.
Sources
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