Rural Electrification Corp - March 2013 Results Preview - Motilal Oswal

- Loan growth is expected to remain healthy at 20%+ levels. We model a loan growth of ~23% YoY and ~5% QoQ.

- RECL's margins have expanded by more than 50bp (over the past two quarters), led by an improvement in yields, while it also maintained a tight leash on cost of funds. However, in the current quarter, we expect margins to moderate marginally by ~5bp QoQ to 4.9%.

- We factor a MTM loss of INR266m for 4QFY13 v/s INR220m in 3QFY13 and INR64m in 4QFY12.

- Barring a couple of accounts, asset quality at large remained healthy, though it will remain a key monitor, given the uncertain macro environment. We conservatively model provisions of INR150m during the quarter.

- We expect PAT to grow by ~40% YoY and ~4.5% QoQ.

- The stock trades at 1x FY14E and 0.8x FY15E BV.

Source : Equity Bulls

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