The global brokerage highlighted attractive valuations, robust loan growth, and stable asset quality as key factors behind its positive outlook for the two state-owned financial institutions.
In intraday trade, PFC shares climbed 1.5% to Rs 434, pushing its market capitalisation to Rs 1,42,811 crore, while REC rose 1% to Rs 401, with a market cap of Rs 1,05,065 crore.
Morgan Stanley has set a target price of Rs 485 for REC and Rs 508 for PFC, suggesting a potential upside of 22% and 18%, respectively, from their previous closing prices.
“PFC and REC should each achieve 12% F25-28e loan CAGRs and 17-19% average ROE,” Morgan Stanley said in a note titled India Financials | PFC and REC: Attractive entry point; initiate with OW.
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Morgan Stanley said it expects both PFC and REC to deliver compound annual loan growth of 12% between FY25 and FY28, along with an average return on equity (ROE) of 17–19%.
“At a F27e P/E of 5-6x for self-sustaining low-mid teens loan growth and a 3.8-4.5% dividend yield, with asset quality likely to be stable, we find risk-reward compelling vs. our coverage,” the brokerage said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)