Brokerage firm CLSA has maintained its ‘outperform’ rating on power financier stocks REC Ltd. and Power Finance Corporation Ltd. (PFC), on Friday, February 28.

CLSA has a price target of ₹590 apiece on REC, an upside of 56% from its previous closing price and a target of ₹540 per share on PFC, which implies a potential upside of 43% from Thursday’s close.

The brokerage said the power financers’ performance on asset quality in its genco, renewable and infrastructure book has been quite comfortable in the last two years, with largely no major or new slippages.

It also said the discom book for these players has always been tricky and volatile. CLSA said it expects the power financiers to increase their provision coverage ratio (PCR) on discoms in the fourth quarter but it should be range bound.

CLSA continues to be comfortable with asset quality of PFC and REC and expects write-backs between ₹2,200 crore to ₹2,500 crore from pending bad loans. The brokerage also added that write-backs from the KSK Mahanadi resolution is also expected in the coming quarters.

All 12 analysts with coverage on both REC and PFC have “buy” ratings on them.

At 10.40 am, REC shares were trading 3.08% lower at ₹366.85 apiece and the PFC shares were trading 3.06% lower at ₹366.9 apiece.

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