PSU Stocks to buy now for an upside potential of upto 47%; Do you own any?

Power financier companies play a crucial role in India’s economy by financing projects across the power sector, including generation, transmission, and distribution. This support helps enhance energy infrastructure, contributing to economic growth and electrification efforts across the country. Additionally, their involvement in government initiatives helps improve sector efficiency and achieve national electrification goals.

The Brokerage Firm CLSA is bullish on these Power Financiers Stocks with an upside potential of up to 47 percent to keep in your radar

1. Power Finance Corporation Ltd

The shares of Power Finance Corporation Ltd, with a total market capitalization of Rs 1.33 Lakh Crores on Thursday, were trading at Rs 403 per share which was 2 percent up from the previous closing price of Rs 395.7. The shares are trading at a discount of 30.5 percent from its 52 week high of Rs 580 apiece. The shares of PFC generated a return of 366 percent in the last three years, and a 361 percent return in the last five years.

CLSA has an “Outperform” rating on the stock of Power Finance Corporation Ltd. It sets a price target of Rs 540 per share on PFC, which implies a potential upside of 37 percent from Wednesday’s closing price of Rs 395.7.  

PFC Ltd is a government-owned non-banking financial company that finances India’s power and infrastructure sectors. The company provides financial assistance to power companies, equipment manufacturers, and infrastructure projects and also provides consultancy services for power projects. It offers a variety of financial products and services, including loans, lease financing, and debt refinancing.

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2. Rural Electrification Corporation Limited

The shares of Rural Electrification Corporation Ltd, with a total market capitalization of Rs 1.08 Lakh Crores on Thursday, were trading at Rs 412 per share which was 2.5 percent up from the previous closing price of Rs 402. The shares are trading at a discount of 37 percent from its 52-week high of Rs 654 apiece. The shares of RECL generated a return of 350 percent in the last three years, and a 376 percent return in the last five years.

CLSA also has maintained an “Outperform” rating on the stock of Rural Electrification Corporation Ltd. It sets a price target of Rs 590 per share on RECL, which implies a potential upside of 47 percent from Wednesday’s closing price of Rs 402.  

REC Ltd an Indian public sector company that provides financial assistance for power projects. It offers loans for power generation, transmission, and distribution. Some of its services include setting up of power generating stations, improving the power sub-transmission and distribution system, and finances various power generation, transmission and distribution projects. 

Brokerage Rationale 

The brokerage noted that the asset quality performance of power financiers in their generating company (genco), renewable, and infrastructure portfolios has remained stable over the past two years, with no significant slippages.

CLSA mentioned that the distribution company (discom) portfolios of these companies have been more volatile. It also expects REC and PFC to increase their provision coverage ratio (PCR) on discoms in Q4FY25, though this increase is likely to remain within a certain range.

CLSA is optimistic about the asset quality of these power financiers and anticipates write-backs of Rs 2,200 crore to Rs 2,500 crore from pending bad loans. The brokerage also expects write-backs from the KSK Mahanadi resolution in the upcoming quarters.

Written By Adhvaitha Nayani

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