Maintain 'BUY' on REC - Geojit BNP Paribas

- REC's Q2FY13 PAT came in higher, mainly due to both lower provisions and tax rate.

- NIM came in at 4.76%. Higher NIMs were driven by an increase in yields (to 11.86% from 11.52%) and better efficiency (improvement in borrowings-to-loan ratio).

- Loan growth momentum was maintained – REC registered a YoY increase of 24%.

- T&D continued to dominate, accounting for 51% of total disbursements, while generation represented 44%. Management maintains its loan growth target of 20%+.

- Short-term loans represented only 5% of total disbursements, which is a positive.

- Asset quality remained healthy. Net NPA was 0.38% in Q2FY13, vs 0.4% in Q2FY12. Exposure to the private sector increased marginally to 12%, compared to 11% last year.

- REC's management has consciously reduced its dependence on bank borrowings (contribution down from 8% in 1HFY12 to 6% in 1HFY13). Debt-to-equity remained stable at 5.73 times.

- Maintain BUY recommendation on REC at current levels (Current Price: Rs.221).

Source : Equity Bulls

Keywords