Synopsis: Maharatna PSU shares fell after weak Q4FY26 results, with lower revenue, interest income, and a 21.6% drop in net profit. Macquarie and Morgan Stanley remain positive, maintaining Outperform/Overweight ratings with ₹455 targets, citing strong dividend yield, valuation comfort, and long-term growth potential.
The shares of a Maharatna PSU company specialising in financing and promoting power sector development in India, are in focus in the day’s trade as they have declined 5 percent following their Q4 results and let’s also look at the brokerage views on results and operations.
With a market capitalization of Rs. 95,836.19 crores in the day’s trade, the shares of REC Ltd declined upto 4.67 percent, making a low of Rs. 358.10 per share compared to its previous closing price of Rs. 375.65 per share.
What Happened
REC Ltd, engaged in financing and promoting power sector development in India, is in the spotlight following its Q4 results and brokerage views as follows:
Its Interest Income declined by 5.5 percent YoY from Rs. 14,947 Crores in Q4FY25 to Rs. 14,119 Crores in Q4FY26, and it declined by 3.0 percent QoQ from Rs. 14,559 Crores in Q3FY26 to Rs. 14,119 Crores in Q4FY26.
Its Revenue from operations declined by 5.0 percent YoY from Rs. 15,334 Crores in Q4FY25 to Rs. 14,564 Crores in Q4FY26, and it declined by 3.2 percent QoQ from Rs. 15,051 Crores in Q3FY26 to Rs. 14,564 Crores in Q4FY26.
Its Net Profit YoY declined by 21.6 percent from Rs. 4,310 Crores in Q4FY25 to Rs. 3,375 Crores in Q4FY26, and on a QoQ basis, it decreased by 16.7 percent from Rs. 4,052 Crores in Q3FY26 to Rs. 3,375 Crores in Q4FY26. The earnings per share (EPS) for the quarterly period stood at Rs. 12.82, compared to Rs. 16.37 in the previous year’s quarter.
The Board of Directors, in its meeting held on April 28, 2026, has recommended a final dividend of Rs. 1.55 per equity share (face value ₹10 each) for the financial year 2025–26, subject to approval by shareholders at the upcoming Annual General Meeting. Brokerage views on the result:
Macquarie on REC Limited
Macquarie has maintained its Outperform rating on REC Limited with a target price of Rs. 455 with an upside potential of 21% from the previous close, noting that the stock continues to look attractive primarily because of its steady and appealing ~5% dividend yield, which provides strong income support for investors even amid short-term volatility in earnings performance.
The company reported a profit after tax (PAT) miss, which was largely driven by a combination of higher operating expenses and elevated credit costs, both of which weighed on profitability. In addition, loan prepayments during the period acted as a drag on overall AUM growth, limiting the expansion of the loan book.
Credit costs were also higher than expected, mainly due to conservative provisioning policies adopted by the company to strengthen its balance sheet. While this approach negatively impacted near-term earnings, it is generally viewed as prudent since it helps build buffers against potential future stress in asset quality.
Morgan Stanley on REC Limited
Morgan Stanley has maintained an Overweight rating on REC Limited with a target price of Rs. 455, indicating continued positive long-term confidence in the stock despite a weaker-than-expected quarterly performance and near-term earnings pressure.
The quarter was relatively weak, with PAT declining 21% year-on-year and missing estimates by around 17–22%, mainly due to higher provisioning requirements and weaker pre-provision operating profit (PPOP). Net interest margin (NIM) also came in lower than expected at 3.55%, adding further pressure on profitability.
On the growth side, AUM expansion remained muted at 3% YoY, while disbursements fell 9% quarter-on-quarter, reflecting slower lending momentum. However, higher Stage 1 coverage led to increased provisioning, and despite short-term weakness, underlying asset quality trends remain broadly healthy, with valuations still considered attractive at around 6x FY27 P/E and ~1x P/BV.
Company Overview & Others
REC Limited (formerly Rural Electrification Corporation Limited) is a leading Indian public sector financial company under the Ministry of Power. It was established in 1969 to finance and promote rural electrification projects across India. Over time, its role has expanded beyond rural power projects to funding the entire power infrastructure value chain, including generation, transmission, and distribution projects.
Today, REC Limited is classified as a Maharatna CPSE, reflecting its large scale and strategic importance. It provides loans to central/state power utilities, state governments, and private sector companies in the power and infrastructure sectors. The company plays a key role in supporting India’s energy expansion and renewable energy transition through long-term financing and development support.
The company reports a ROCE of 9.71% and a strong ROE of 20.0%, indicating efficient use of capital and healthy returns generated for shareholders. It also has a low PEG ratio of 0.44, which suggests that the stock may be undervalued relative to its expected earnings growth.
From a valuation and shareholder return perspective, the stock is trading at around 1.10 times its book value and offers an attractive dividend yield of 4.96%. In addition, the company has maintained a consistent dividend payout ratio of 29.9%, reflecting a balanced approach between rewarding shareholders and retaining earnings for growth.
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