CLSA has upgraded its outlook on power financer stocks, including REC Ltd. and Power Finance Corp., highlighting their strong project pipelines and robust loan growth prospects. Both companies have been given a 'high conviction outperform' rating, reflecting CLSA's confidence in their future performance.
REC stock has a target price of Rs 525 from CLSA. The company's loan growth over the past five to seven quarters has been strong, ranging between 15-21%. With 55% of the past 2.75 years of sanctions still undisbursed — primarily in the genco, renewable, and infrastructure segments — REC is poised for double-digit to mid-teen loan growth over fiscals 2026-27.
Despite process-related slowdowns, the strong sanction pool and no slippage over the past two-three years provide confidence in REC's asset quality during this capex cycle. REC stands out with best-in-class loan growth, ROE, and dividend yield, the brokerage noted.
"While there could be delays, REC's project pipeline and loan growth outlook are strong, in our view. No slippage over the past 2.75 years and the outlook on new disbursals is better," it said.
Power Finance Corp. has a target price of Rs 364.30 from CLSA. PFC's fast disbursals in its discom book have peaked, but the pending sanctions, which account for 59% of the past 2.75 years, indicate a strong pipeline.
This undisbursed sanction pool alone could support double-digit to mid-teen loan growth over FY26-27, even with process or approval-related delays.
PFC continues to deliver best-in-class loan growth, ROE, and dividend yield. Concerns over asset quality are limited, as lenders focus on approvals and agreements in the current capex cycle, the brokerage noted.
"Any concern over asset quality should be limited as lenders in the current capex cycle are focused on approvals and agreements," it said.
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