Feb 15, 2017 04:35 PM IST | Source: Moneycontrol.com

Hold Power Finance Corporation; target of Rs 155: Edelweiss

Edelweiss recommended hold rating on Power Finance Corporation with a target price of Rs 155 in its research report dated February 13, 2017.

Hold Power Finance Corporation; target of Rs 155: Edelweiss

Edelweiss' research report on Power Finance Corporation

Power Finance Corporation’s (PFC) Q3FY17 core operating performance was below estimates with forex gains supporting overall profitability. Revenue momentum was below estimate (NII down >1% YoY) following muted loan growth (up <3% YoY/flat QoQ, partially on repayment of AP under UDAY to the tune of INR 25bn) and NIMs decline (pressure on lending yields).

Outlook

Going ahead, there are further repayment dues under UDAY which will exert further pressure on growth and NIMs. Asset quality improved marginally with GNPLs at 3.07% (3.21% in Q2FY17) and restructured book at INR 294bn (INR 299bn in Q2FY17). Despite favourable valuations (0.9x FY19E P/ABV), near- to medium-term challenges and uncertainties relating to riskier impaired loans could test high returns profile. Maintain ‘HOLD’.

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