RECLTD - Fundamental Analysis: Financial Health & Valuation
Back to ListFundamental Rating: 3.7
| Stock Code | RECLTD | Market Cap | 88,938 Cr. | Current Price | 337 ₹ | High / Low | 429 ₹ |
| Stock P/E | 5.46 | Book Value | 320 ₹ | Dividend Yield | 5.33 % | ROCE | 9.71 % |
| ROE | 20.1 % | Face Value | 10.0 ₹ | DMA 50 | 350 ₹ | DMA 200 | 366 ₹ |
| Chg in FII Hold | -0.67 % | Chg in DII Hold | 0.15 % | PAT Qtr | 3,362 Cr. | PAT Prev Qtr | 4,043 Cr. |
| RSI | 39.8 | MACD | -5.27 | Volume | 47,51,841 | Avg Vol 1Wk | 45,43,686 |
| Low price | 304 ₹ | High price | 429 ₹ | PEG Ratio | 0.40 | Debt to equity | 6.11 |
| 52w Index | 26.8 % | Qtr Profit Var | -20.6 % | EPS | 61.8 ₹ | Industry PE | 18.8 |
📊 Financial Overview: REC Ltd shows moderate fundamentals with quarterly PAT declining from ₹4,043 Cr. to ₹3,362 Cr. (-20.6% variation). ROE at 20.1% is strong, but ROCE at 9.71% is modest. Debt-to-equity ratio of 6.11 is high, typical for financing companies, but adds leverage risk. EPS of ₹61.8 supports earnings strength, while dividend yield of 5.33% provides attractive income for investors.
💰 Valuation Indicators: Current P/E of 5.46 is well below the industry average of 18.8, suggesting undervaluation. P/B ratio of ~1.05 (₹337 / ₹320) indicates fair pricing near book value. PEG ratio of 0.40 highlights strong growth potential relative to valuation. Intrinsic value appears higher than current market price, offering margin of safety.
🏢 Business Model & Competitive Advantage: REC Ltd operates as a leading financial institution in power sector financing. Its competitive advantage lies in government backing, scale, and sector expertise. However, high leverage and sector concentration pose risks. Strong dividend payouts and consistent profitability support resilience.
📈 Entry Zone & Holding Guidance: Attractive entry zone lies between ₹310–₹325 (near recent lows and DMA 200 support). Long-term investors may hold for dividend yield and undervaluation benefits. Fresh entry is favorable at current levels, but monitoring leverage and profit trends is essential.
Positive
- 🌟 Strong [ROE](ca://s?q=Explain_ROE) at 20.1%
- 📈 Attractive dividend yield of 5.33%
- 💰 Undervalued compared to industry P/E
- 🛡️ Government backing ensures stability
Limitation
- ⚠️ High [debt-to-equity](ca://s?q=Debt_to_equity_ratio_explained) ratio of 6.11
- 📉 Decline in quarterly PAT (-20.6%)
- 🔎 Modest [ROCE](ca://s?q=Explain_ROCE) at 9.71%
Company Negative News
- 📉 Decline in FII holdings (-0.67%)
- ⚠️ Profit contraction in latest quarter
Company Positive News
- 📈 Increase in DII holdings (+0.15%) shows domestic investor support
- 💰 Strong dividend payouts continue
Industry
⚡ The power financing industry in India trades at an average P/E of 18.8. REC’s P/E of 5.46 highlights undervaluation. Industry growth is supported by infrastructure expansion and electrification initiatives, but leverage management remains critical.
Conclusion
✅ REC Ltd offers undervaluation, strong dividend yield, and government-backed stability. However, high leverage and profit contraction pose risks. Entry around ₹310–₹325 provides a favorable risk-reward balance. Long-term holding is suitable for income-focused investors, with cautious monitoring of debt levels and earnings consistency.
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