Bernstein Private Wealth Management (also known as AllianceBernstein) is a global asset management firm that provides investment management and research services to institutional, high-net-worth, and retail investors.
Bernstein has given an outperforming rating to two power financing PSUs, labeling them as the most preferred players in India’s power sector. CNBC TV 18 reported.
Bernstein expects continued strong growth in power demand and projects lower non-performing asset (NPA) risks for this cycle, with provisions likely to reverse throughout the current financial year.
Additionally, highlighted that while 100 GW of generation capacity was added in the last six years, they anticipate an additional 300 GW to be added in the next six years.
Listed below are two PSU stocks with an upside of up to 23%
REC Ltd
REC Ltd shares gained 4.5% on wednesday’s trade to ₹563.65 per share. The company has a market capitalization of ₹1,46,262 crores.
REC Limited provides and supports rural electrification projects for state power utilities, private sector project developers, central power sector utilities, and state governments.REC Ltd shares gained 31% in the last six months and 243% in the last 12 months.
The company’s revenue increased by 24 percent year on year, from ₹10,243 crore in Q4FY23 to ₹12,677 crore in Q4FY24. During the same time, net profit has increased by 33 percent, from ₹3,065 crore to ₹4,079 crore.
Bernstein has initiated a ‘buy’ rating on REC Ltd. with a target price of ₹653 per share, representing an upside potential of up to 21% from Tuesday’s close price of ₹539.20 apiece.
REC shares currently trade at a financial year 2025 price-to-earnings multiple of 8.5 times.
Power Finance Corporation Ltd
Power Finance Corporation Ltd Ltd shares gained 5.5% on wednesday’s trade to ₹530.20 per share. The company has a market capitalization of ₹1,72,991 crores.
Power Finance Corporation (PFC) is a Maharatna category. The PFC is a financial organization that specializes in power sector finance, offering financial support to power projects in India such as power generation, transmission, and distribution.
Power Finance Corporation Ltd Ltd shares gained 33% in the last six months and 198% in the last 12 months.
The company’s revenue increased by 20 percent year on year, from ₹20,061 crore in Q4FY23 to ₹24,141 crore in Q4FY24. During the same time, net profit has increased by 23 percent, from ₹6,129 crore to ₹7,556 crore.
Bernstein has initiated a ‘buy’ rating on Power Finance Corporation Ltd. with a target price of ₹653 per share, representing an upside potential of up to 23% from Tuesday’s close price of ₹502.45 apiece.
PFC shares currently trade at a financial year 2025 price-to-earnings multiple of 6.7 times.
On the valuation side, REC and PFC exhibit superior Return on Equity (RoE) of over 20% compared to their peers in the power sector, yet they are trading at more attractive valuations relative to their industry peers, according to Bernstein.
According to Bernstein, REC, and PFC, which had been overlooked by investors for over a decade, now boast market capitalizations ranging between $15 billion and $20 billion, with trading volumes nearing $125 million. Despite this, both stocks are currently trading at 8 to 10 times trailing price-to-earnings ratios.
Written by Omkar Chitnis
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