Shares of power financiers Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) rallied on Wednesday after a global brokerage initiated coverage on the stocks with "outperform" call.

Brokerage Views: Bernstein set target price of ₹620 for PFC and ₹653 for REC on the basis that investors were underestimating the duration and intensity of this power cycle. Non performing assets (NPA) risk is lower for power financing companies in this cycle, the brokerage said.

The brokerage firm sees these stocks as leveraged power sector plays. It also noted that these companies also shows a stronger correlation to power prices and stocks than to banking peers. 

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Power financiers also have better return on equity and growth than power peers while trading at a cheaper valuations than all of them, the research firm added. 

For the June quarter, REC logged loan sanctions of ₹1.12 lakh crore, growing 24% from the ₹90,797 crore it posted in the same quarter last year. The firm also saw a 27.8% jump in its loan disbursements to ₹43,652 crore in the quarter. 

Price Action: shares of the power financier companies gained on Wednesday morning session. Shares of REC surged 4.31% to ₹562.45, while PFC’s share price gained 4.95% to ₹527.55. 

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