RECLTD - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 4.2
| Stock Code | RECLTD | Market Cap | 98,048 Cr. | Current Price | 372 ₹ | High / Low | 452 ₹ |
| Stock P/E | 5.72 | Book Value | 314 ₹ | Dividend Yield | 4.83 % | ROCE | 9.92 % |
| ROE | 21.5 % | Face Value | 10.0 ₹ | DMA 50 | 364 ₹ | DMA 200 | 385 ₹ |
| Chg in FII Hold | -1.51 % | Chg in DII Hold | 0.35 % | PAT Qtr | 4,043 Cr. | PAT Prev Qtr | 4,426 Cr. |
| RSI | 55.0 | MACD | 1.68 | Volume | 1,10,22,049 | Avg Vol 1Wk | 1,46,21,892 |
| Low price | 331 ₹ | High price | 452 ₹ | PEG Ratio | 0.35 | Debt to equity | 6.24 |
| 52w Index | 34.2 % | Qtr Profit Var | 0.35 % | EPS | 65.2 ₹ | Industry PE | 19.3 |
📊 Analysis: REC Ltd. appears undervalued with a P/E of 5.72 compared to the industry average of 19.3, making it attractive for value investors. ROE at 21.5% is strong, while ROCE at 9.92% reflects moderate efficiency. The PEG ratio of 0.35 suggests growth potential relative to valuation. Dividend yield of 4.83% provides steady income, enhancing long-term appeal. However, the debt-to-equity ratio of 6.24 is high, typical for financing companies, but it requires monitoring. Technical indicators (RSI 55, MACD positive) show neutral-to-bullish momentum. Ideal entry zone lies between ₹360–₹370, closer to DMA 50 support levels.
📈 Exit Strategy: If already holding, investors should maintain positions for 3–5 years to benefit from consistent dividends and capital appreciation. Partial profit booking can be considered near ₹440–₹450 (recent highs). Long-term holding is justified given strong ROE, low valuation multiples, and attractive dividend yield, though monitoring debt levels and institutional activity is essential.
✅ Positive
- Low P/E (5.72) compared to industry average (19.3).
- Strong ROE (21.5%) indicates profitability.
- Attractive dividend yield of 4.83% provides steady income.
- PEG ratio of 0.35 suggests undervaluation relative to growth.
- EPS of ₹65.2 reflects consistent earnings power.
⚠️ Limitation
- High debt-to-equity ratio (6.24) increases financial risk.
- ROCE (9.92%) is moderate compared to ROE.
- FII holdings declined (-1.51%), showing reduced foreign interest.
📉 Company Negative News
- Quarterly PAT declined slightly from ₹4,426 Cr. to ₹4,043 Cr.
- High leverage remains a structural concern.
- Reduced foreign institutional participation.
📈 Company Positive News
- Consistent profitability with EPS at ₹65.2.
- Strong dividend payout history supports investor confidence.
- DII holdings increased (+0.35%), showing domestic institutional support.
🏭 Industry
- Industry PE at 19.3 shows sector is moderately valued.
- Power financing sector benefits from infrastructure and energy demand growth in India.
- Government support for power projects ensures long-term stability.
🔎 Conclusion
REC Ltd. is a strong candidate for long-term investment, offering undervaluation, strong ROE, and attractive dividends. Ideal entry is around ₹360–₹370 for better risk-adjusted returns. Existing investors should hold for 3–5 years, with partial profit booking near ₹440–₹450. Despite high leverage, the company’s consistent earnings and sectoral tailwinds make it a reliable long-term compounder.