February 23, 2017 / 17:57 IST
REC’s PAT (Rs 17.5 bn, up 28% YoY) beat expectations on lower provisions (Rs 1.8 bn of provision reversal from upgrade of a large thermal exposure). Management stated that a few more such upgrades are in the pipeline. GNPA ratio improved 13 bps QoQ (at 2.3% on 180 dpd) and mgmt. expects it to remain the same on 90 dpd as well.
Outlook
Deployment of cash proceeds from UDAY is a monitorable, but sanctions growth allays concerns. We raise our multiple to 1.1x (vs. 1x) to factor in improved asset quality and higher dividend (Rs 7/share). At CMP, REC trades at 0.9x FY18E P/ABV of Rs 154.
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