Buy Poonawalla Fincorp; target of Rs 465: Motilal Oswal

Motilal Oswal's research report on Poonawalla Fincorp

Poonawalla Fincorp (PFL)’s 1QFY25 NII grew ~37% YoY to ~INR5.8b (5% miss), while its PPoP increased ~47% YoY to ~INR4.3b (9% miss). PFL’s 1QFY25 PAT grew ~46% YoY and declined ~12% QoQ to ~INR2.9b (9% miss).Opex rose ~33% YoY to ~INR2.4b (~15% above estimate), with the C/I ratio broadly stable QoQ at ~36% (PY: ~38%). Provisions stood at INR425m (vs. estimated credit costs of ~INR500m).PFL articulated its strategy under the new MD & CEO Mr. Arvind Kapil (ex- HDFC Bank). The new management team will prioritize scalability by improving collections and distribution. It plans to double its product suite with new product offerings. Risk management will be a key focus area.

Outlook

We cut our FY25/FY26E earnings by 9%/13% to factor in NIM compression and elevated opex from investments in distribution, management team, and collections. We model a ~34%/29% AUM/PAT CAGR over FY24-FY26E and expect PFL to deliver an RoA/RoE of ~4.4%/~17% in FY26. Reiterate BUY with a TP of INR465 (premised on 3.3x FY26E BVPS).