Buy Poonawalla Fincorp; target of Rs 570: Motilal Oswal

Motilal Oswal's research report on Poonawalla Fincorp

Poonawalla Fincorp (PFL)’s 4QFY24 NII grew 48% YoY to ~INR5.6b (in line), while its PPoP surged 103% YoY to ~INR4.1b (in line). PFL’s 4QFY24 PAT jumped 84% YoY/25% QoQ to ~INR3.3b (9% beat), while its FY24 normalized PAT grew 75% YoY to ~INR10.3b.Opex rose 12% YoY to ~INR2.3b (~9% above estimate), with the C/I ratio being broadly stable QoQ at ~36% (PY: ~51%). Provisions stood at INR240m (vs. estimated credit costs of ~INR180m).PFL is committed to boosting productivity through digitization and is preparing for growth by introducing new products such as co-branded credit cards (to be launched in the next 2-3 weeks).PFL has laid down a robust foundation for sustainable profitability through initiatives that will lead to lower operating costs (as a % of AUM), higher business volumes, and robust asset quality.

Outlook

We model a ~37%/39% CAGR for AUM/PAT over FY24-FY26 and expect PFL to deliver an RoA/RoE of ~4.9%/~19.4% in FY26. Reiterate BUY with a TP of INR570 (premised on 4x FY26E BVPS).