REC Ltd (RECLTD)

FairStock Score: 74/100 — STEADY

Score breakdown: P/E: 3/3 · ROCE: 0/2 · Growth: 0/2 · Dividend: 1/1

Key Financials

Strengths

• P/E of 5.34 and P/B of 1.26, with Graham Number ₹662.26 offering roughly 47.18% margin of safety.
• Strong ROE of 22% and latest quarter net profit of ₹4,052 Cr on sales of ₹15,018 Cr indicate solid earning power.
• Sales growth of 12.19% and profit growth of 10.16%, with PEG of 0.80, show growth available at a reasonable price.
• Dividend yield of 5.15% provides attractive income support.
• Promoter holding of 52.63% and FairStock Score of 78/100 suggest stability and aligned ownership.

Concerns

• Debt/Equity of 6.33 is high; leverage amplifies risks if borrowing costs rise or asset quality weakens.
• Free cash flow is deeply negative at ₹-40,366 Cr; it needs to be confirmed as loan-book growth rather than a cash drain.
• Piotroski F-Score of 5/9 is mediocre, signalling only average financial health on a multi-factor basis.
• Altman Z-Score of 0.62 and EV/EBITDA of 855.81 are not reliable for lenders, but they still highlight the need to examine balance-sheet risk.

AI Analysis

Let me think like a business owner. REC is not a hot technology company; it is a large financial institution at ₹376.45, a P/E of only 5.34 and a P/B of 1.26 against book value of ₹297.64. A 22% ROE with this valuation deserves serious attention. ROCE of 9.96% is less meaningful for a leveraged lender; return on equity is the better yardstick. The latest quarter confirms the engine: ₹15,018 Cr of sales produced ₹4,052 Cr of net profit. Growth is steady—12.19% sales and 10.16% profit—so this is not a dying business. With a PEG of 0.80, the market is giving me growth almost free, while a 5.15% dividend yield pays me to wait. Promoter holding of 52.63% adds governance comfort, and the FairStock Score of 78/100 points to a steady operation. Graham's framework asks about book value and margin of safety. The Graham Number is ₹662.26 versus ₹376.45, implying a 47.18% margin of safety—a real cushion. Yet I must be honest about risks: debt/equity of 6.33 is high but normal for a lender. Negative free cash flow of ₹-40,366 Cr needs scrutiny; it likely reflects loan disbursements, not daily losses, but I cannot ignore it. I will not rely on Altman Z of 0.62 or EV/EBITDA of 855.81 because those ratios do not fit financial intermediaries. A Piotroski score of 5/9 is mediocre, so execution and asset quality matter. What is the moat? The ability to earn high returns on equity while using borrowed funds—a double-edged sword. Overall, this is a steady compounder selling at a discount, not an exciting growth stock. I would call it a Stalwart: reasonable growth, high ROE, and a cheap price.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer