Hold REC; target of Rs 185: Religare

Religare's research report on RECRECL’s Q3FY16 PAT stood at Rs 13.7bn vs. RCMLe of Rs 16.1bn. The earnings miss was largely due to high provisions made towards fresh as well as existing NPAs. Asset quality deteriorated with GNPAs rising ~70% QoQ as two accounts worth Rs 13.9bn slipped into NPAs. Restructured assets increased 4% QoQ to account for 10% of loans. Loan growth at ~20% YoY was largely in line with the last quarter, but NIMs slid 26bps QoQ to 4.6%. Maintain HOLD with a Mar’17 TP of Rs 185 (from Rs 290 earlier).We expect continued pressure on asset quality and loan growth, and assume a 20% hit on restructured assets (Rs 68/sh). Maintain HOLD with a revised Mar’17 TP of Rs 185 (rolled over from a Sep’16 TP of Rs 290).

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