Structural Story Intact In PFC, REC Ahead Of Q2 Earnings, Says Macquarie — Check Target Price

The structural growth story of India's power financiers, Power Finance Corp (PFC) Ltd. and REC Ltd., remains intact, according to Macquarie, which believes asset quality will remain robust in the September quarter.

In its latest note, Macquarie has maintained 'buy' calls on both the scrips. The target price also remains unchanged at Rs 555 for PFC and Rs 525 for REC.

Macquarie does not expect any large recoveries or slippages in the second quarter for PFC and REC. It also forecasts negligible credit cost for both counters.

While the credit costs are expected to remain positive, it will be in a limited territory of around ten basis points.

This may come as a relief, especially at a time when almost the entire banking ecosystem is suffering from elevated credit cost, especially in vehicle finance and small-ticket SME loans.

That being said, Macquarie projects moderation in asset under management (AUM) growth, with REC to grow at a range of 12.5% year-on-year. PFC, on the other hand, is expected to grow at 10.6% year-on-year.

Meanwhile, disbursement growth for REC and PFC is seen at 27% and 31% respectively, in the second quarter of fiscal 2026.

Net interest margin is expected to remain stable at around 3.6%, which is in line with broader trends.

As far as profit after tax is concerned, Macquarie expects a quarter-on-quarter and year-on-year decline for REC, due to the lack of negative credit cost that had boosted profit in previous quarters. For PFC, reported PAT may appear weaker sequentially but would normalise once adjusted for dividends received from REC.

“The structural story remains intact,” Macquarie wrote, adding that current valuations still offer some level of upside on both PFC and REC.