Buy Rural Electrification Corp; target of Rs 460: Motilal Oswal

Motilal Oswal's research report on Rural Electrification Corp

Rural Electrification Corp’s (RECL) 1QFY26 PAT grew ~29% YoY to INR44.5b (~8% beat). NII grew ~19% YoY to ~INR55.7b (in line). Other income stood at - INR3.4b (PY: INR3.5b) due to currency translation losses of INR6.4b. Opex declined ~12% YoY to ~INR1.9b and cost-income ratio stood at ~2.5% (PQ: 3.1% and PY: ~3.4%). The decline in opex was driven by lower CSR and other employee expenses during the quarter. PPoP grew 5% YoY to INR50.3b (~5% miss), primarily because of higher currency translation losses.

Outlook

We estimate RoA/RoE of 2.6%/20% and a dividend yield of ~5.6% in FY27. Reiterate BUY with a TP of INR460 (premised on a target multiple of 1.2x Mar’27E P/BV).