REC Share Price Target 2025: Motilal Oswal Bullish on Strong Growth Prospects, Buy, Sell or Hold?

Rural Electrification Corporation (REC), a Central Public Sector Undertaking under the Ministry of Power, has received a bullish recommendation from brokerage firm Motilal Oswal.

REC, known for financing projects across the power sector value chain, has been given a 'Buy' rating with a current market price (CMP) of Rs 505 and a target price of Rs 630, translating into an upside of 25%.

Growth Drivers: Disbursements and AUM
Motilal Oswal projects REC’s disbursements and Assets Under Management (AUM) to grow by 16% and 18% year-on-year (YoY), respectively. The brokerage expects this growth to be driven by strong demand across the power sector, aided by REC’s well-established role in financing generation, transmission, and distribution projects.

‘Disbursements/AUM expected to grow ~16%/18% YoY. Expect credit costs to remain benign, aided by stress assets resolutions,’ as mentioned in the report.

Benign Credit Costs Amid Stable Asset Quality
The report highlights REC's benign credit costs, supported by stress asset management. Commentaries around margins and guidance on disbursements/AUM growth are the key monitorables.

Margins to Contract Slightly
REC’s margins are likely to contract by 15 basis points quarter-on-quarter (QoQ) to 3.5%, according to Motilal Oswal.

Sectoral Preference: Power Finance in Focus
Motilal Oswal has reiterated its preference for power financiers like REC and Power Finance Corporation (PFC), alongside housing finance and mortgages. It remains cautious about microfinance institutions, citing delayed recovery and elevated credit costs in the sector.

Outlook and Key Monitorables
The report emphasizes the importance of commentary around REC’s margins and guidance on disbursements/AUM growth in the coming quarters. REC’s promising growth trajectory and its critical role in the power sector make it a top pick for investors seeking long-term returns.

With an estimated 8% YoY PAT growth and steady NII expansion for FY25, REC stands out as a solid investment bet amidst a mixed performance across the NBFC sector.

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