Power Finance Corporation and REC shares fall up to 3% after Morgan Stanley downgrade

PFC and REC's loan growth has moderated sharply, while system and bank credit to the power sector have accelerated, according to Morgan Stanley.

“The growth disconnect has been much greater than we thought,” the brokerage stated in its note, adding that it sees recovery from the current position to be gradual.

The brokerage also cut its earnings estimates for both companies. For PFC, it lowered the target price by 20% and cut core EPS estimates by 5.5% for FY28E and 7% for FY29E. For REC, it reduced the target price by 16%, while lowering EPS estimates by 5% for FY28E and 7% for FY29E.

The company reported a slight decline in revenue from operations to Rs 28,527 crore in Q1 FY27, from Rs 28,539 crore in the corresponding quarter of the previous financial year.

Also Read |PFC shares tumble 5% to 4-month low after weak Q1 earnings. Why Motilal Oswal still recommends Buy

Also Read |REC Q1 Results: Net profit dips over 6% to Rs 4,193 crore

PFC-REC Merger

Earlier in July, the boards of Power Finance Corporation (PFC) and REC approved the merger scheme between the two companies, with the share-swap ratio set at 88 PFC shares for every 100 REC shares held. PFC owns a 52.63% stake in REC. The Centre owns 55.99% in PFC but does not directly own a stake in REC.Also Read |PFC-REC merger: Which stock should you buy before the mega deal creates Rs 11 lakh cr power financing giant

PFC Share Price

Shares of Power Finance Corporation fell 2.7% to Rs 365.80 on the BSE on Thursday. The stock has declined over 11% in the past month and 14% over the last three months. PFC shares are down over 9% so far this year.## REC Share Price

Shares of REC fell 2% to Rs 329.40 on the BSE on Thursday. The shares of the company have declined over 6% in the last six months and have fallen 9% in the year so far.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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