November 16, 2016 / 12:18 IST
Axis Direct's research report on REC REC reported PAT of Rs 17.5 bn (up 8% YoY), above our expectation, on the back of lower-than-expected provisions. PAT was up 18% YoY adjusted for net impact of change in accounting policies (Rs 190 mn) and interest income recognized on accrual basis for a contested NPA account (Rs 826 mn).Asset quality was stable with absolute GNPAs remaining flat QoQ, while the ratio improved 10bps QoQ to 2.45%.
With capital adequacy above statutory requirement (CAR of 21.02%), emerging visibility in growth and healthy return ratios (RoAA of 2.6% and RoAE of 20% in FY18), REC’s underlying business metrics remain strong. Deployment of cash proceeds from UDAY is amonitorable, but growth in sanctions allays the concern. At CMP, REC trades at 0.84x FY18E P/ABV of Rs 153.
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