On Wednesday, ICICI Securities initiated coverage on REC Ltd (RECL:IN) with a Buy rating and a price target of INR600. The firm noted REC's significant role in power financing, holding approximately a 20% market share according to company estimates. REC aims to increase the share of renewables in its loan book to about 30% by fiscal year 2030 from the current 9%.
ICICI Securities highlighted REC's strong growth prospects, predicting a compound annual growth rate (CAGR) of approximately 17% in the company's loan book from fiscal year 2024 to 2027. The growth is expected to be supported by macroeconomic tailwinds and an anticipated capital expenditure of INR 43 trillion.
The research firm also pointed out REC's improvements in asset quality, which have benefited from the resolution of stressed assets in recent years. These resolutions have led to provisions write-backs, improved return ratios, a stronger balance sheet, and enhanced dividend payout capabilities for REC.
In their coverage initiation, ICICI Securities valued REC at 1.7 times its estimated book value for fiscal year 2026. The firm's positive outlook on REC is supported by the company's strategic targets and its financial performance, which could lead to a significant increase in the company's market share in the power financing sector.
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