27 November 2014

PTC India Financial Services -Growth on fast track… :: ICICI Securities, link

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Growth on fast track…
• NII grew a healthy 67% YoY (11% QoQ) to | 83 crore supported by
healthy NIM of 6.5% and loan book growth of 78% YoY and 12%
QoQ to | 5551 crore
• Fee income grew 105% to | 14.79 crore from | 7.20 crore (Q2FY14)
forming 20% of the total net operating income
• Operating expense was down 11% YoY to | 10 crore as forex loss
for Q2FY15 was | 4 crore vs. | 6.2 crore in Q1FY14
• PAT at | 38 crore was up 27% YoY but de-grew 27% QoQ on
account of provisions made of | 31 crore for past equity investment
• Asset quality continues to be strong with nil NNPA
Robust growth aided by small base, focus on renewable energy
PFS’ advances have grown exponentially at a CAGR of 93% FY11-14 to
| 4530 crore. PFS initially had the largest exposure to thermal power
projects at ~60% at the end of FY12. Most of these projects were
primarily sourced as a reference from parent company PTC India.
However, of late, the company has been able to garner business on its
own with focus on renewable energy projects. PFS is a preferred financier
to small and medium power projects, especially in new and renewable
energy space. As on Q2FY15, renewable energy loans comprise 36% (|
2000 crore) of the total loan book, followed by thermal 31%, others 24%
and hydro another 8%. Going forward, we have factored in loan book
growth at a CAGR of 55% in FY14-17E to | 18492 crore. We expect the
share of renewable energy loans to go up to 52% increasing from | 1752
crore in FY14 to | 9424 crore by FY17E. PFS initially had made equity
investments in some power projects. As on Q2FY15, net equity
investments stood at | 370 crore.
Healthy NIM at 6% above but may moderate, going ahead
PFS enjoys NIM of 6.5% as on Q2FY15 due to higher yields of 13-14% on
low ticket, mid-sized project lending and higher capital funds. Leveraging
on its power sector lineage, PFS is able to structure loans and provide
other technical assistance to small developers, which enables it to
command a higher yield. On the liability side, PFS in the past had enjoyed
the benefit of raising funds through low cost tax free bonds and ECBs.
However, with growth on the fast track, the bank borrowing is set to
increase, which will pressurise NIM. We expect NIMs to stay at 5%
factoring in increase increased bank borrowings (share set to increase to
86%vs. 80% now) and capital raising of | 600 crore in FY17E.
Strong asset quality with nil NNPA
PFS’ book is fairly new (growth in debt financing only in last three to four
years). Hence, there are hardly any NPAs as on Q2FY15. Going ahead, we
have factored in some deterioration as the book matures. However, asset
quality will continue to be at manageable levels (GNPA at 1.2% of credit
at | 255 crore FY17E) aided by lower gestation projects in renewable
energy, which get commissioned maximum in eight to 12 months.
Fast track business growth with healthy asset quality; maintain BUY
We believe there is ample opportunity to grow in the power project
financing space and PFS has been able to set itself as a niche player in the
renewable energy space. We are introducing FY17 estimates with credit
CAGR of 55% in FY14-17E and factoring in capital raising in FY17E to
support strong balance sheet growth. RoA, RoE may stay healthy at 3.6%,
25.5% respectively, driven by PAT CAGR of 42% in FY14-17E. We roll
over our valuation to FY17E and revise our target price upwards to | 62
(1.5x FY17E ABV) from | 53 earlier. We maintain BUY on the stock

LINK
http://content.icicidirect.com/mailimages/IDirect_PTCFinancial_Q2FY15.pdf

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