CRISIL revises Power Finance`s fair value to Rs 229
CRISIL Research has come out with its report on Power Finance Corporation (PFC). The research firm has maintained a fundamental grade of 4/5 to the company in its May 25, 2012 report.
June 04, 2012 / 18:06 IST
CRISIL Research has come out with its report on Power Finance Corporation (PFC). The research firm has maintained a fundamental grade of 4/5 to the company in its May 25, 2012 report.
Power Finance Corporation Ltd’s (PFC’s) Q4FY12 and FY12 results were in line with CRISIL Research’s expectations. Loans to the private sector continued to drive the strong growth in disbursements. Gross NPAs rose due to loan given to Maheshwar Hydro Power Project which has been classified as an NPA. Despite the short-term concerns on the NPAs, we maintain our fundamental grade of 4/5 due to PFC’s leading position in power sector financing and importance of power sector to the economy.Q4FY12 standalone result analysis
• Disbursements increased 48% y-o-y led by 5x increase in loan disbursements to the private sector. Disbursements to the state sector grew 39% y-o-y. PFC disbursements are typically high in Q4 compared to other three quarters. The q-o-q disbursements increased 59%.• AUM increased 10.4% q-o-q (up 31% y-o-y) to Rs 1,302 bn. The contribution of the private sector to AUM increased from 6.8% in FY11 to 11.3% in FY12.• Net interest income (NII) increased 13.7% q-o-q (up 51.4% y-o-y) to Rs 12.7 bn. Yield increased by 4 bps q-o-q but the cost of funds declined by 14 bps q-o-q resulting in 18 bps q-o-q expansion in spread. The NIMs stood at 3.88% in Q4FY12.• Provisions increased 146.2% q-o-q (271.8% y-o-y) to Rs 960 mn (Rs 390 mn in Q3FY12) on account of a rise in gross NPAs to 1.04%. PFC has classified loan of Rs 7 bn to Maheshwar Hydro Power Project as an NPA in Q4FY12.• The company had changed its accounting policy in the previous quarter to amortise the forex loss over tenure of the loans. It has amortised Rs 1.38 bn during FY12 on account of forex losses.• Adjusted net profit grew 15.3% q-o-q (up 37.0% y-o-y) to Rs 7.98 bn. Adjusted EPS was Rs 6.0.• The total dividend for the year (including interim dividend) was Rs 6.0 per share. At the current market price of Rs 150, and same level of dividend in the next year, the stock would offer dividend yield of 4.0%.Valuations: Current market price has strong upside
We have lowered our P/B multiple for PFC from 1.5x to 1.2x. We believe that delays in meaningful reforms addressing the financial strength of state distribution utilities and fuel supply would weigh on the valuations of the company. We have rolled forward our valuation to FY14. Our fair value is revised from Rs 256 to Rs 229. At the current market price of Rs 150, our valuation grade is 5/5.To read the full report click on the attachmentDisclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report. The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.© CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"
Read More
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
