Edelweiss Research has upgraded Rural Electrification Corporation (REC) to 'Buy' from 'Hold' with target price of Rs 196 as against current market price (CMP) of Rs 143 in its report.

Commenting on the results, Edelweiss Research said, ''REC Q3FY17 PAT, at Rs 17.5 billion (up 28% YoY/flat QoQ), surpassed our estimates on higher other income and lower credit cost. On a positive note, asset quality improved with stressed pool (NNPLs plus restructured book) declining to 11.4% from 13.6% in Q2FY17.''

Commenting on the investment rationale, the stock broker said, ''We were skeptical about implementation of UDAY as well as performance of some private sector stressed exposure which pose risks to REC's earnings. While it has played out to an extent, impact was lower than earlier envisaged. In near term, implementation of UDAY may exert some pressure on growth and NIMs may also come off, but growth visibility will also improve following SEB's better health after implementation of UDAY. Even though there are stressed exposures, we believe significant recognition is unlikely over near- to-medium term. This can re-rate the stock to 1.1x multiple and we upgrade to 'BUY/SO' from 'HOLD/SP' with a revised target price of Rs 196 (Rs 143 earlier).''

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