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Shares of Indian Renewable Energy Development Agency Ltd (IREDA) climbed 6 per cent on Monday after a strong set of quarterly results. While PhillipCapital upped its share price on the stock to Rs 110 from Rs 80 earlier, it maintained its 'Sell' call on the PSU. The brokerage said substantial exposure to the private sector and a high proportion of the vulnerable portfolio do not provide confidence for low credit costs in the medium term. IREDA shares climbed 6 per cent to close at Rs 170.45 on BSE. At this price, PhillipCapital's target price of Rs 110 suggests a 35.46 per cent potential downside ahead. The brokerage expects IREDA to see strong loan growth of 25 per cent compounded annually over FY24-26 on rising demand for renewable energy in the country. But the earnings growth is not expected to match the loan growth due to pressure on margins, it suggested. "We expect IREDA's earnings growth of 20 per cent/18 per cent in FY25/26, translating into return on equity of 16.1 per cent. The stock trades at 4.3 times/3.7 times FY25/26 ABVPS of Rs 35/42," PhillipCapital said. The brokerage said IREDA's loan growth is high but return ratios are moderate and there is higher exposure to the private segment, which undermines conviction. It sees expect IREDA's return on asset to decline to 2.2 per cent in FY25 and 2.1 per cent in FY26 from 2.3 per cent in FY24. "We believe the best is already priced in to the stock. We maintain SELL rating with revised target of Rs 110 (Rs 80 earlier), valuing the company at 2.5 times FY26 BVPS of Rs 42," IREDA said. On the March quarter earnings, PhillipCapital said strong loan growth and pipeline provided visibility on balance sheet growth. IREDA managed its funding cost well, which can be seen in stable cost of fund, the brokerage said. As the leverage in the balance sheet increases, net interest margin should come under pressure. The asset quality continues to improve leading to negligible credit cost, it said. Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
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