Shares of Power Finance Corporation Ltd. and REC Ltd. slumped up to 8% on Monday after CLSA slashed their price targets on mixed first quarter results.
CLSA flagged that loan growth moderated for both companies, dragged by run-down in the Revamped Distribution Sector Scheme (RDSS) book, while growth in other segments remained modest. PFC reported 4% year-on-year loan growth, while REC's loan book grew just 1% year-on-year.
The brokerage said the smaller size of the RDSS book is a positive. The scheme now accounts for just 3% of REC's loan book, reducing the impact of the run-down on overall growth going ahead. Core margins were slightly lower sequentially for both companies, primarily due to moderation in lending yields, CLSA said.
REC, however, reported a sharp foreign exchange loss during the quarter, following the depreciation of the rupee. Asset quality remained benign for both lenders, with no significant deterioration reported during the quarter.
Following the Q1 performance, CLSA cut its FY27 profit-after-tax estimates for both PFC and REC by 2%-3%.
CLSA maintained an 'Outperform' rating on REC but cut its target price to Rs 420. For PFC, the brokerage also retained an 'Outperform' rating while reducing its target price to Rs 500.
Share Price
PFC's Shares traded 8.25% lower at Rs 385.30, near day's low of Rs 384.85
REC was down 6.09% on the NSE to Rs 344.65, near the Rs 344 intraday low.
REC's stock has fallen 3.53% year-to-date and 9.74% in the last 12 months. Whereas, PFC has risen 8.51% year-to-date, but fallen 4.67% in the last 12 months.
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