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Buy Power Finance Corporation, target price Rs 191: ICICI Securities

ICICI Securities has buy call on with a target price of Rs 191. The current market price of Power Finance Corporation is Rs 128.85.

Time period given by analyst is one year when Power Finance Corporation Ltd. price can reach defined target.

Power Finance Corporation Ltd., incorporated in the year 1986, is a Large Cap company (having a market cap of Rs 33700.64 Crore) operating in Term Lending Institutions sector.

Financials
For the quarter ended 31-03-2021, the company reported a Consolidated Total Income of Rs 18155.14 Crore, down -1.55 % from last quarter Total Income of Rs 18441.72 Crore and up 11.69 % from last year same quarter Total Income of Rs 16254.65 Crore. Company reported net profit after tax of Rs 3896.59 Crore in latest quarter.


Investment Rationale
Power Finance Corp (PFC) has reported Q1FY22 PAT of Rs22.7bn (up 34% YoY, down 2% QoQ) – much higher than expectations. Net interest income grew 15% YoY as well as QoQ as against expectations of pressure on NIM due to cut in lending rates w.e.f. Apr’21. Yields surprisingly improved QoQ and spreads were sustained at 3%. This has more than offset credit cost provisioning of Rs4.5bn and forex MTM loss of Rs2.7bn. Stage-3 assets remained stable at Rs211.5bn (5.7%) and a couple of projects are in advances stages of resolution. Coverage ratio was shored up on stage-3 assets to 65% (63% in FY21) and additional provisions were created on stage-1 assets due to revision in ratings of discoms. Loanbook was flat QoQ and growth is likely to be spurred by tranche-II of discom package, focus on renewable energy, and refinancing. For the first time, PFC announced an interim dividend in Q1 itself (of Rs2.25 per share).

Promoter/FII Holdings
Promoters held 56 per cent stake in the company as of June 30, 2021, while FIIs held 17.3 per cent, DIIs 19.4 per cent and public and others 7.3 per cent.

(Disclaimer: Views and recommendations given in this section are the analysts’ own and do not represent those of ETMarkets.com. Please consult your financial adviser before taking any position in the stock/s mentioned.

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