Why REC Share Price is Rising

For the past 4 weeks, REC's share price has continued to climb, capturing the attention of investors and analysts alike.

This surge can be attributed to several factors including its involvement in the renewable energy (especially solar) sector.

REC has positioned itself as a frontrunner in the renewable energy sector.

On 2 May 2024, REC share price rallied around 9% to hit a fresh all time high on the BSE.

Let's find out why the stock is on an uptrend.

Strong Q4 Results

On 30 April 2024 post market hours, REC reported its earnings for the quarter ended March 2024.

The company's consolidated net profit jumped 33% year-on-year (YoY) to Rs 40.8 billion (bn), helped by healthy growth in core income and a provision write-back.

REC recorded a provision write-back of Rs 7.1 bn during the quarter which significantly boosted its net profit.

The firm's net interest income (NII) surged to Rs 42.7 bn, a growth of 25.4% YoY.

For the entire FY24, the company broke several records and posted its highest ever annual net of Rs 140.2 bn.

This was aided by improving asset quality and effective resolution of stressed assets.

Resetting of the lending rates also helped bring down finance costs.

REC's net worth grew to Rs 687.8 bn as of March 2024, an increase of 19% YoY.

The company's loan book also grew to its highest ever, Rs 5.09 trillion as against Rs 4.35 trillion in March 2023.

Along with results, the company's board also announced a dividend of Rs 5 per share.

This is in addition to the interim dividend of Rs 11 per share it already paid out. So the total dividend paid by REC for FY23-24 comes to Rs 16.

REC has always maintained a healthy dividend payout owing to steady financials and margins.

Here's a table which shows REC's historical financials:

Financial Snapshot of REC

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	253,990	299,517	355,528	392,691	394,783
Growth (%)	12%	18%	19%	10%	1%
Operating Profit	237,460	260,298	322,843	345,144	376,633
OPM (%)	93%	87%	91%	88%	95%
Net Profit	57,414	49,723	83,782	100,357	111,670
Net Margin (%)	23%	17%	24%	26%	28%
ROE (%)	17.1	14.2	21.3	21.4	20.6
ROCE (%)	9.2	8.7	9.3	9.1	9.1
Dividend (Rs)	8.3	8.3	9.6	11.5	12.6
Debt to Equity (x)	7.1	8.1	7.5	6.5	6.6

Data Source: Ace Equity

What Next?

REC recently made a grand entry into the prestigious Nifty Next 50 index. This comes after the company's stock price rallied over 290% in FY24, outperforming the midcap index's 61% gains by a big margin.

A big factor that drove the rally in REC shares in the year gone by was its focus on the solar energy sector.

The company is involved in several renewable energy projects and has been appointed as the overall program implementation agency for the Rooftop solar mission.

Apart from that, it has also diversified into non-power infrastructure and logistics, financing projects such as railways, airports, and ports.

What's more, REC has not added any new NPA in the last eight quarters.

The company is aiming to be NPA free by the end of FY25, once bad assets of over Rs 138 bn are resolved.

The company has a debt-raising plan of Rs 1.6 trillion for the new fiscal.

This Navaratna company enjoys strong support from its parent company, PFC, and is the nodal agency for the government's Revamped Distribution Sector Scheme (RDSS).

Being a primary beneficiary of the government's new scheme, REC has an opportunity to grow its loan book.

The Modi government is targeting one crore households by December 2024, which shows the aggressive expansion plan and the big opportunity for REC.

How REC Share Price has Performed Recently

In the past 5 days, REC share price has rallied 24%.

The stock has seen a steep rally in the past 10 trading session where it rose from Rs 400 to Rs 550 at present.

REC has a 52-week high of Rs 555 touched on 2 May 2024 and a 52-week low of Rs 127 touched on 19 May 2023.

In the past 1 year, REC share price has rallied over 300%.

Here's a table comparing REC with its peers -

Comparative Analysis

Company	REC	IFCI	PFC	Satin Credit	Ujjivan Financial
ROE (%)	20.6	-3.9	27.2	0.3	42.1
ROCE (%)	9.1	6.8	9.6	8.4	10.7
Latest EPS (Rs)	53.7	0.4	57.1	39.5	67.4
TTM PE (x)	9.4	114.9	7.7	6.7	8.5
TTM Price to book (x)	1.9	2.7	1.5	1.2	1.8
Dividend yield (%)	3.2	0.0	3.0	0.0	0.9
Industry PE	10.7
Industry PB	2.2

Data Source: Ace Equity, Equitymaster

About REC

Rural Electrification Corporation (REC) is a Navratna Central Public Sector Enterprise under Ministry of Power.

The company is engaged in the financing of power generation, transmission and distribution projects throughout India.

REC occupies a nodal position in the government's plans for the growth of the Indian power sector. This is particularly for developing the power infrastructure in rural areas.

The company was earlier administering grants and providing loans as the nodal agency for the Rajiv Gandhi Gramin Vidyutikaran Yojana (RGGVY), which was primarily aimed at the electrification of all villages in India.

To know more, check out REC financial factsheet and its latest quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...