Buy Rural Electrification Corp; target of Rs 465: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Rural Electrification Corp

Rural Electrification Corp’s (RECL) 2QFY26 PAT grew ~10% YoY to INR44.3b (in line). PAT in 1HFY26 grew 19% YoY and we expect PAT in 2HFY26 to grow by 13% YoY. NII grew ~10% YoY to ~INR54.5b (in line). Other income stood at INR4.6b (PY: INR1.2b) due to higher fee and commission income of INR4.7b (PQ: INR1.4b and PY: INR483m). Opex rose ~12% YoY to ~INR2.2b and cost-income ratio was stable at ~2.5% (PQ: 2.5% and PY: ~3.1%). PPoP grew 16% YoY to INR56.9b (in line).

Outlook

We estimate RoA/RoE of 2.6%/19% and a dividend yield of ~6.3% in FY28. Maintain BUY with a TP of INR465 (premised on a target multiple of 1.1x Sep’27E P/BV).

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Rural Electrification Corp_30102025_Motilal Oswal