Mumbai-based brokerage firm CLSA has upgraded its rating on REC Ltd to ‘High Conviction Outperform’, citing better loan growth expectations, higher Return on Equity (ROE), and stronger dividend yield. The move signals growing confidence in REC’s financial performance amid India’s infrastructure development plans.
CLSA’s Rating Upgrade
The global brokerage has highlighted REC’s improving loan book growth and its ability to generate higher shareholder returns. CLSA believes that the company’s strong performance and better earnings outlook make it an attractive investment option in the Indian stock market.
However, the brokerage firm revised its target price from ₹590 to ₹525, reflecting expectations of mid-teen loan growth instead of the earlier 20% projection. Despite the lowered target, the new price still offers a 39% upside potential from Monday’s closing price of ₹378.
Key Factors Behind the Upgrade
- Loan Growth: CLSA expects REC’s loan growth to remain robust, supported by government infrastructure projects.
- Higher ROE: The company is forecasted to deliver stronger returns on equity due to better operational efficiency.
- Dividend Yield: REC’s consistent dividend payouts have made it a preferred choice for long-term investors.
Stock Market Update
REC’s stock price showed a positive movement following CLSA’s rating upgrade. On Tuesday, the stock opened higher and touched an intraday high of ₹385, reflecting renewed investor confidence. Analysts expect further gains in the coming sessions as the market absorbs the latest rating update.
Broader market indices such as the Nifty 50 and Sensex also traded in the green, driven by gains in banking and infrastructure stocks.
Market Reaction
Investors are likely to take CLSA’s rating upgrade as a positive signal, potentially boosting REC’s stock price in the near term. The upgrade reflects confidence in REC’s business model and financial stability, especially in a period of rising infrastructure spending.
Conclusion
REC’s recent upgrade by CLSA highlights the company’s promising growth trajectory and financial strength. Despite the lower target price, the stock still offers significant upside potential for investors looking to benefit from India’s infrastructure boom. With consistent loan growth and attractive dividends, REC remains a compelling investment opportunity in the Indian stock market.
