2-3% Dividend Yield: REC OR PFC, Which Powerpack PSU NBFC Stocks To Add In Your Portfolio?

REC Ltd and Power Finance Corporation (PFC) are two peas in the same pond. While PFC is the parent, REC is its subsidiary. Both are NBFCs and the backbone when it comes to providing financial services to the Indian power sector. They are multi-baggers with a Maharatna status. Which one to add to the portfolio?

REC Limited:

Last week, on Friday, REC share price stood at Rs 532.45 apiece, up by 2% on BSE with a market cap of Rs 1,40,206.01 crore. The stock's 52-week high and low is at Rs 607.65 apiece and Rs 150.40 apiece respectively.

As per BSE data, REC has a low PE ratio of 10x, but the return on equity is healthy at 20.38%. Further, the stock has a dividend yield of 3%. YTD, the stock is up by 25.% on BSE, while in a year, the stock zoomed by 248%.

In FY24, owing to the improving asset quality and effective resolution of stressed assets, resetting of the lending rates and effective management of finance costs, REC has been able to record its highest-ever annual profit after tax of ₹ 14,019 crores. As a result, the Earnings Per Share (EPS) for the year ended 31st March 2024 accelerated by 27% to ₹ 53.11 per share as against Rs 41.85 per share as of 31st March 2023.

Aided by growth in profits, the Net Worth has grown to Rs 68,783 crores as of 31st March 2024, registering an increase of 19% YoY.

Also, REC's loan book has maintained its growth trajectory and has increased by 17% to Rs 5.09 lakh crores as against Rs 4.35 lakh crores as of 31st March 2023.

On the current market price, REC has a dividend yield of 3%, In FY24, the company delivered up to 160% dividend worth Rs 16 per share.

As per Trendline, the consensus recommendation from 5 analysts for REC Ltd. is BUY. EPS is expected to grow by 10.4% in FY25. 1-year average target price on REC is at Rs 587, signalling a 10% potential upside ahead.

REC is a 'Maharatna' company under the administrative control of the Ministry of Power, Government of India, and is registered with RBI as a Non-Banking Finance Company (NBFC), Public Financial Institution (PFI) and Infrastructure Financing Company (IFC).

REC has evolved and expanded its financing mandate to cover the entire Power-Infrastructure sector comprising Generation, Transmission, Distribution, Renewable Energy and new technologies like Electric Vehicles, Battery Storage, Green Hydrogen etc. More recently REC has also diversified into the Non-Power Infrastructure sector comprising Roads & Expressways, Metro Rail, Airports, IT Communication, Social and Commercial Infrastructure (Educational Institutions, Hospitals), Ports and Electro-Mechanical (E&M) works in respect of various other sectors like Steel, Refinery, etc.

Power Finance Corporation (PFC):

PFC share price is at Rs 509.80 apiece on BSE, with a market cap of Rs 1,68,239.19 crore last week on Friday. The stock is closing its gap towards a 52-week high of Rs 559.50 apiece, while it has more than tripled from its 52-week low of Rs 559.50 apiece.

With a PE of 23.45x and RoE of 15%, the PFC share price is up by 29.05%, while in a year, the stock zoomed by 223%.

On the current market price, the stock has a dividend yield of 2.16%. In FY24, the company paid dividends of 110% valuing to Rs 11 per share.

PFC is now the highest profit-making NBFC in India, with a 24% remarkable increase registered in Standalone Profit After Tax from Rs. 11,605 crores in FY'23 to Rs. 14,367 crores in FY'24. Also, PFC Group registered the highest annual Profit After Tax (PAT) with a 25% increase - Rs. 21,179 crores in FY'23 to Rs. 26,461 crores in FY'24. While 16% growth in consolidated loan asset book from Rs. 8,57,500 crores as of 31.03.2023 to Rs. 9,90,824 crores was witnessed in FY24.

The asset quality has further improved with the Net NPA ratio reaching its lowest level in the last 6 years at 0.85% in FY'24 vs. 1.07% in FY'23. No new NPA added in more than a year. Gross NPA for FY'24 is at 3.34%, a decrease of 57 basis points from 3.91% in FY'23.

Incorporated on July 16th, 1986, Power Finance Corporation Ltd. is a Schedule-A Maharatna CPSE and is a leading Non-Banking Financial Corporation in the Country. PFC's registered office is located in New Delhi and regional offices are located in Mumbai and Chennai.

PFC plays a crucial role in the rise of India as a global player. Increasingly, a country's development is gauged by measuring its energy usage. With a large fraction of our nation still, unfortunately, without any access to electricity, PFC will become an increasingly important factor in the years to come.

As per Trendlyne data, the consensus recommendation from 5 analysts for Power Finance Corporation Ltd. is STRONG BUY. EPS is expected to grow by 12.2% in FY25. 1-year target price in PFC is Rs 546, signalling a 7% surge ahead.

Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the stock mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.