Reiterate 'buy' on REC - TP Rs.224 - Geojit BNP Paribas Financial Services

- Rural Electrifications Corporation (REC) performed well in 1QFY13. Earnings beat market expectations on better net interest margin (NIM) and loan growth.

- Cost of funds declined 4bps qoq due to higher ECB borrowings while yield increased 17bps qoq on re-pricing of short term loans.

- NPA remained low, which kept earnings momentum strong.

- Net loan growth remained strong at 24% yoy. Disbursement to short term loans increased sharply, contributing 28% to 1QFY13 total disbursement versus 11% in 1QFY12.

- Management maintained its loan growth target of 20% for FY13.

- The company has indicated that there was no major restructuring in the quarter. Majority of loans in 1QFY13 were disbursed to states of Tamil Nadu, Assam, Uttar Pradesh and Maharashtra.

- The company has indicated that 67% of forex loans are hedged.

- ECB accounted 13% of total borrowings at end June.

- The company has reported forex loss of Rs.374 million.

Source : Equity Bulls

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