https://www.business-standard.com/markets/news/rec-soars-46-in-1-month-enters-top-100-most-valued-firms-by-m-cap-chart-123081700382_1.html

With Government of India, setting and pursuing the target of achieving 500 GW of renewable energy capacity by 2030, energy transition is expected to drive significant investment in the power sector.

Photo: Bloomberg

SI ReporterMumbai

3 min read Last Updated : Aug 17 2023 | 3:10 PM IST

Follow Us

Listen to This Article

1x

Shares of REC hit a new high at Rs 234.45, as they rallied 5 per cent on the BSE in Thursday’s intra-day trade on strong growth outlook. The stock of state-owned financial institution company has zoomed 46 per cent in past one month. In comparison, the S&P BSE Sensex, was down 0.5 per cent at 02:37 PM, and has slipped 2.4 per cent during the period.

Last Updated: Aug 18 2023 | 03:59 PM IST

A sharp surge in stock price of REC has helped the stock break into India’s top-100 most valuable companies chart in terms of market capitalisation. With Rs 61,735 crore market cap, REC stood at number 100th position in overall ranking, the BSE data shows. REC surpassed state-owned bank, Indian Overseas Bank, which has market cap of Rs 60,525 crore, data shows.

REC holds a strategic position, given REC’s role in financing power sector & implementing policies and flagship programs of the Government of India; the company continues to maintain a strong financial position, is well capitalised with high asset quality, to meet future business growth.

REC has a diversified asset portfolio with no single borrower with more than 10 per cent asset portfolio; and strong relationship and network with stakeholders in Central & State Government enables REC to access new strategic initiatives.

REC plays a key role in implementation of flagship Government of India schemes and financing India’s power sector; rising energy demand in a fast growing economy augurs well for future business growth.

The significant investments are required as per the generation capacity expansion planning report by The Central Electricity Authority of India (CEA). Installed generation capacity by end of financial year 2027 is projected to be 610 GW requiring investments of Rs 14.54 trillion. The Ministry of Power has permitted REC to lend to infrastructure & logistics sector also subject to certain limits. This opens up another large universe of financing avenues for REC.

REC in its FY23 annual report said that the power sector in India, is on course for a long period of high growth and transformation which is visible in the increasing deployment of clean renewables. With Government of India, setting and pursuing the target of achieving 500 GW of renewable energy capacity by 2030, energy transition is expected to drive significant investment in the sector.

The global trend towards Electric Vehicles (EVs) and its fast adoption in India is likely to see an increased demand for electricity. The National Smart Grid Mission, which aims to modernize the country’s power grid is expected to improve grid stability and reduce power losses. The government is also promoting the use of smart meters and digital technologies to improve the efficiency of the distribution network.

The government is promoting measures such as cost-reflective tariffs, improved collection efficiency, and reduction in AT&C losses to improve the financial health of distribution companies. As Indian economy continues to grow fast, with a growing population and the current low level of per-capita electricity consumption, the future outlook for investments in power sector is quite promising over the long term, REC said.

Heard the Q1 FY24 concall today, looking at the company after a long time since I exited more than a year ago.

Large part of the discussion in the call was on inflation, muted consumer demand and depressed margins. Popeyes is doing extremely well, says the company but no numbers were given. That is still some time away. Hong’s Kitchen seems to be struggling at the unit economics level, and hence no major expansion. Dunkin was not even mentioned, I think. DP Eurasia acquisition – company has taken a hit on account of the Ukraine War it seems. Though the war was unforeseen, I was never a fan of that investment, countries like Turkey and Russia are politically risky even otherwise.

Overall, no major upside triggers in Jubilant Foodworks right now – company seems to be just waiting for the overall environment to improve. A large Bangalore commissary is slated to open shortly.

My impression is that the company has already become quite large, and growth will only be incremental from here on. LFL / SSSG numbers are always in single digits, and growth due to store expansion will slow down too, since new store openings will add only a small percentage on such a large base (compared to the past). This means valuation has to correct from a growth stock to a stable cash cow stock. Non pizza revenues can be a new metric to track in future, once Popeye and others acquire a decent size. But right now, they seem to be too small to make a difference.

There is 4 quarters of EPS decline, resulting in a P/E of 118 which shows investors have not yet given up hope. The good thing is cash flows are strong, aided by negative working capital. Last three years, capex has been heavy. Capex will come down this year, which means company will accumulate even more cash. But their past capital allocation decisions do not inspire confidence. I have written about it before (click here). That is another problem.

(Disc: No positions)

@james_kerala

Nifty and Sensex are in a corrective mode ever since hitting levels close to 20k. ( 19991 to bre precise) Nifty crossed its previous all time high of 18900 and went to the above quoted levels. After such a sharp rally, I think some amount of cooling is expected and desirable. The whole previous rally from 16800 to near 20k has been viewed skeptically by a lot of market participants. And bull markets thrive on skepticism. We are into the fourth week of correction in Nifty and hardly give up 5% from the top.

And while the overall markets are correcting, the small and midcaps are having a good time. Someone who has been sector specific and stock specific has had a good time. Many stocks in specific sectors, e.g PSU and PSU banks are holding out all right. In fact in past few days, there has been a sharp rally in the smaller PSU banks like IOB, JK Bank, Central Bk , MahaBank, UCO bank, just to name a few I track. If markets were in sharp corrective mode, usually everything falls. But in our markets its not so. So I think this is a routine correction, maybe a well deserved rest for an overheated Nifty and Sensex.

How this correction pans out and if and when it completes, is a matter of conjecture. I usually am not too fond of forecasting overall markets as I have seen very few people get it right consistently. Its much more easy to find out individual patterns in charts and check fundamental triggers and then take positions, and still if there are those (routine) corrections in these names , then so be it.

I do not follow the methods and ratios followed by Nooresh Merani. So not much idea about it. But having followed him through his writing, I think he has a very good track record of catching market turns and he does it in uncomplicated ways with lot of sensible logic.

GAIL chart pattern I discussed before also. It has broken out of a strong resistance band and now retesting that breakout zone. Sometimes, these corrections go slightly deeper and longer than expected. For stocks that have broken out of strong resistances, the simple moving average to follow for near term is the 10 WEMA. And then for longer term, the 30 WEMA. I don’t have any predecided stop losses in GAIL but as long as the structure appears okay, I would hold on.

@Anurag_Agnihotri I don’t track UPL or LIC.

@SAGHOS01 Bajaj finance chart you put up clearly shows it is range bound between levels approximating 5500-8000 In fact one can draw a symmetrical triangle on weekly charts. Any major move could come about once it breaks out of this broad range or from triangle.

Churn is 2.5-4x annually.

Holding period can range from 30 days to 1yr+.

No stoploss.

Stocks enter if they meet certain filtering criterions and are withing top decile of rankings. They exit if any filter is triggered or they drop out of top decile.