Power Finance Companies: Re-rating potential waning, says Espirito Santo

Jul 21 2014, 01:09 IST
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SummaryStructural headwinds do not bode well for PFC and REC

past couple of years were for refinancing, which means future growth is dependent on new investments in the power sector.

Valuation: PFC and REC are trading at 1.0x and 1.2x FY16e BVPS (book value per share) respectively, which is close to their mean historical valuations. At current valuation levels, we see limited re-rating potential given structural headwinds. We downgrade PFC REC with revised FVs (fair values) of R300 (from R177) and R310 (from R188).

Espirito Santo

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