The shares of Rural Electrification Corporation (REC) were trading in the green on July 25, even after the Maharatna Public Sector Undertaking (PSU) reported a 29 percent jump in its net profit in the first quarter of FY26. Brokerages have issued positive notes for the stock, seeing strong upside potential from current levels.
REC on July 24 reported a net profit of Rs 4,466 crore for the first quarter of the financial year 2026. This marks an on-year jump of 29 percent from the Rs 3,460 crore net profit reported during the corresponding quarter of the previous financial year.
The firm's revenue from operations meanwhile rose 13 percent year-on-year to Rs 14,737 crore in Q1 FY26. It had earlier reported revenue from operations at Rs 13,079 crore in Q1 FY25.
Along with the Q1 results, the firm also announced its first interim dividend of Rs 4.60 per share for the ongoing financial year 2026. The record date to determine the eligibility of the shareholders set to receive the payment has been set on August 1.
The shares of the company were marginally up in morning trade. The stock gained nearly one percent to trade at Rs 408 apiece.
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Morgan Stanley kept an 'overweight' call on the stock, with a target price of Rs 485 per share. This implies an upside potential of nearly 20 percent from the stock’s previous closing price of Rs 404.9 per share.
According to Morgan Stanley, REC's 29 percent on-year surge and 5 percent sequential rise in Q1 profit beat estimate by 11 percent. Provision reversals and net interest income beating expectations drove results. The firm's 3.9 percent net interest margin beat estimates, although a sequential decline was reported due to interest write-backs, it said.
The international company further said that REC's disbursements jumped 36 percent on-year, led by distribution segment.
CLSA kept a 'High Conviction Outperform' call on the stock, with a target price of Rs 525 apiece. This implies a strong upside potential of nearly 30 percent from the stock’s previous closing price.
The international brokerage said that REC’s Q1 net profit beat its estimate by 4 percent, although loan growth at 10 percent was below guidance. TRN Energy Resolution and provision reversals were key drivers of the earnings.
UBS kept a 'Buy’ call on the stock, with a target price o Rs 550 per share. This implies an upside potential of nearly 36 percent from the stock’s previous closing price, the highest among the three brokerage notes analysed here.
The international brokerage said that its profit after tax beat estimates, driven by write backs. Resolution of one NPA supported performance, it added. UBS further noted that the firm recorded strong RoA at 2.9 percent and RoE at 23 percent.
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