Brokerage firm Emkay Global reiterated its ‘Buy’ rating on REC, while revising its price target down by 13% to ₹525 from ₹600 earlier. The new target implies an upside potential of 35% from current levels.
REC reported a soft quarter, with moderated growth and disbursements driven by higher repayments, including prepayments, and NPA resolutions. However, margins and asset quality remained stable.
The company’s net profit rose 5.5% from last year to ₹4,236 crore, while its core income or Net Interest Income (NII) grew 37.6% on a year-on-year basis to ₹5,877 crore.
REC has cut its growth guidance for its Assets Under Management (AUM) during its earnings call on May 14. The company now expects its AUM to grow between 11% and 13% from 15% and 17% projected earlier.
Additionally, the management on its earnings call also mentioned that it is targeting a loan book of ₹10 lakh crore by 2030, through an annual loan book growth of 12%.
REC expects its margins continues to be in the range of 3.5% to 3.75% going forward.
The management of the Maharatna PSU also said that they are targeting a net zero NPA status by financial year 2026.
The company’s board also proposed a final dividend of ₹2.6 per share, taking the total payout for the full financial year 2025 to ₹18 per share.
To reflect the Q4 performance and management commentary, Emkay has revised down its growth estimates, resulting in a 7–9% cut in AUM and a 4–7% reduction in earnings per share (EPS) for FY26–27E.
Following the recent correction, REC shares are now trading at a price-to-book ratio of 1.0x for FY26E. With an 18% return on equity and a 5% dividend yield, the risk-reward remains favourable.
Emkay said that the price target and valuation multiple cuts are largely driven by the moderation in growth, although it continues to see value in the stock.
Shares of REC Limited settled 2.92% lower on Wednesday at ₹390. The stock is down 23% so far this year.
