REC Power Finance Morgan Stanley Overweight Call Triggers Rally – Is This the Best Value Play in 2025?
In a bold move that could reshape investor sentiment toward India’s power financing sector, Morgan Stanley has initiated an overweight rating on REC and Power Finance Corporation (PFC). The global brokerage’s report signals not just confidence in these state-run financial institutions, but also a shift in how investors perceive value and growth in the infrastructure and power lending space.
On the back of this announcement, both REC and PFC shares jumped 2–3%, as traders and long-term investors rushed to re-evaluate their positions. The timing couldn’t have been better—India’s infrastructure push is entering a high-capex phase, and these financiers are expected to play a pivotal role in powering the economy forward.
Let’s break down why REC Power Finance Morgan Stanley overweight coverage is more than just a short-term rating—it could be one of the smartest long-term wealth-building opportunities for 2025 and beyond.
Morgan Stanley Sees Strong Growth and Profitability in Power Finance Stocks
Morgan Stanley’s latest report cites several key reasons for adding REC and PFC to its ‘Overweight’ coverage list:
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A projected 12% CAGR (compound annual growth rate) in their loan book over the next few years
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Return ratios between 17–19%, which is among the highest in India’s NBFC space
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Attractive valuations with P/E multiples in the range of 5–6x for FY27
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Healthy dividend yields ranging from 3.8% to 4.5%, offering a steady income stream to investors
These factors, when combined with the favorable policy environment and expanding capex cycle, make both stocks highly compelling. The firm believes that despite past concerns around asset quality and regulatory risk, both companies have turned a corner and are now well-positioned to deliver stable, long-term returns.
The REC Power Finance Morgan Stanley overweight report came at a time when Indian markets are increasingly shifting their focus from expensive growth stocks to undervalued, high-dividend public sector enterprises.
India’s Capex Supercycle – The Wind Beneath REC and PFC
A key driver behind Morgan Stanley’s bullish stance is India’s ongoing infrastructure boom. The government is pouring record sums into power generation, transmission, and renewable energy projects. Financing these massive projects will largely depend on NBFCs like REC and PFC, which specialize in long-term, project-based lending.
Both companies are tightly integrated into India’s energy roadmap. PFC is the nodal agency for several government-backed projects, while REC continues to fund rural electrification, green energy transitions, and transmission upgrades.
The 12% loan book growth projected by Morgan Stanley seems increasingly realistic given that power and infrastructure financing requirements are ballooning. This provides a sustainable earnings runway for both entities over the next 5–10 years.
With the focus keyword REC Power Finance Morgan Stanley overweight now gaining media and analyst attention, it’s clear that the broader investment community is starting to understand the long-term story these stocks offer.
Dividends and Valuations: The Twin Pillars of Value Investing
What makes REC and PFC truly stand out is their ability to offer both growth and income. At a time when many tech and private financial stocks are trading at 25–30x earnings, REC and PFC are still available at just 5–6x FY27 earnings—a significant discount.
Despite this undervaluation, they continue to deliver generous dividend payouts, with yields touching 4.5% in some cases. This makes them ideal candidates for income-oriented portfolios, especially for those looking to ride out market volatility with predictable cash flows.
Morgan Stanley’s overweight call is a strong endorsement of this value proposition. It sends a signal that these PSU stocks are no longer just “cheap” but are also financially robust, well-managed, and aligned with national priorities.
REC Power Finance Morgan Stanley Overweight Call Sparks Broader Rethink
The impact of this overweight call isn’t limited to just REC and PFC. It has sparked a broader re-rating across the power and infrastructure finance segment. Investors are beginning to reconsider the potential of public sector NBFCs, especially those with clean balance sheets, strong parentage, and exposure to government-driven capital expansion.
Moreover, the broader market is showing signs of returning to fundamentals. High-quality PSU stocks with clear earnings visibility, low valuation, and decent dividends are starting to outperform. The REC Power Finance Morgan Stanley overweight report may well become the turning point in this narrative.
What Should Investors Watch Going Forward?
While the upside potential is strong, it’s important for investors to track key metrics and events that could affect these stocks in the near and medium term:
1. Loan Book Growth
Monitor quarterly disbursal numbers to ensure loan growth aligns with Morgan Stanley’s 12% CAGR projection.
2. Asset Quality
Although asset quality has improved significantly, investors should stay vigilant about non-performing asset (NPA) ratios and provisioning trends.
3. Government Policy
Any regulatory reforms, changes in interest rate policy, or capital infusion from the government can directly impact both REC and PFC.
4. Sectoral Demand
Demand for power, renewable energy projects, and transmission infrastructure must remain strong to sustain the lending pipeline.
If these factors continue to align, REC and PFC could emerge as multi-year compounders, delivering both capital appreciation and steady dividend income.
Should You Buy Now or Wait?
Given the REC Power Finance Morgan Stanley overweight call and the sharp price moves already witnessed, is it still a good time to enter?
Many analysts believe that this is only the beginning of a sustained rally. The stocks are still trading at a significant discount to intrinsic value. Even if they were to re-rate modestly to 8–10x earnings, it could lead to a 40–60% upside over the next 2–3 years, excluding dividends.
For long-term investors, especially those seeking a mix of safety, growth, and income, the current levels still offer a great risk-reward ratio.
However, investors should avoid chasing short-term rallies and instead build positions gradually. Using systematic investment strategies (like SIPs in stocks or staggered buying) can help reduce timing risk and take advantage of market dips.
Conclusion: Hidden Giants Emerging from the Shadows
The REC Power Finance Morgan Stanley overweight call is more than just a broker note—it’s a signal that value is back in style. In a market that often chases high-P/E, momentum-driven names, REC and PFC represent something different: solid fundamentals, dependable earnings, government support, and a strategic role in India’s growth engine.
As India embarks on its largest capex push in decades, power financing companies are set to be the backbone of that transformation. With loan growth set to accelerate, valuations still undemanding, and dividends flowing regularly, these PSU giants are finally having their moment.
If you’re looking to ride the next big wealth wave—not just for months, but for years—this may be your best chance. The smart money has spoken. Will you listen?
Source: Rupeezy
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