Rural Electrification Corporation Limited

March 20, 2018 . Equities Desk

Power play with attractive dividend yield…. Rural Electrification Corporation Ltd. (REC) is one of the leading public Infrastructure Finance Company in India with a network of 18 project offices including 5 Zonal and 3 sub offices along with 1 Training centre. REC’s business model spans across the value chain of power infrastructure financing along with consultancy and advisory for power distribution and transmission projects catering to large and marquee state run power generation and transmission-distribution companies.

Valuation: REC’s profitability will continue to remain under pressure over FY17-20E as provisions are likely to remain high given the increasing stress in power sector and high level of private restructured loan book (~5.6% of loans). However, the attractive dividend yield of ~7.5% will restrict any further fall in the stock price. Notably, REC consistently rewards its shareholders with healthy dividend, showing that the company is investor friendly. Further, REC is diversifying its portfolio toward renewable projects. Hence, we recommend BUY rating on the stock with a target price (TP) of Rs146 (P/ABV of 0.8x for FY20E).

Research Report – Rural Electrification Corporation Ltd

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