Visit http://indiaer.blogspot.com/ for complete details �� ��
Power finance corporation Ltd
Growth momentum continues;
Raise PO; Reiterate Buy
Raise PO to Rs440 on strong growth momentum continuing
We raise our PO on PFC to Rs440 as the stock is trading at 2.9x FY11 and can
trade at similar multiples one-year out driven by 1) visibility of +20/24% earnings
growth in FY11/12 on volume growth sustaining at +25%; 2) RoEs rising to ~21%
(from 19% in FY10) and; 3) high comfort on asset quality. While the stock has
underperformed in last 3 months owing to growth concerns, 2Q results indicate
that growth (volume) is likely to sustain at +25-30% especially as PFC remains a
direct play on financing of power projects in India (key govt. focus area).
2Q11: Headline profit up only 10% yoy; adj. profit up 22%
PFC reported earnings of Rs7.0bn, up 10% yoy, but, excluding a few one-off’s
(income tax-refund in 2QFY10), adj. earnings growth is 22%. Headline earnings
also lower than est. as other income weak (absence of interest on IT refund) and
higher tax rates on exchange related gains. Topline growth was 24% yoy, ~4%
below est., despite 28% (yoy) volume growth, as margins down 12bps yoy due to
PFC booking (upfront vs. amortizing) expenses (int.) related to recently concluded
US$240mn Yen loan. Adj. margins flat yoy at 4.2%. Huge positive was +80% yoy
sanctions growth; 40% yoy growth in disbursements and; 28% loan growth in 2Q.
Asset quality comfortable with gross at 2bps. CAR at ~17.4% (Tier 1 at 16.4%).
Earnings growth at +20/24% in FY11/12
We have raised our profit estimate by ~1/2% for FY11/12. Spreads to rise in FY11E
(yoy) driven by positive ALM gap (+85% of loans floating vs. ~65% of liabilities
fixed). We est. disb. growth of +32/27%; loan book growth at +27% in FY11/12.
No comments:
Post a Comment