Shares of Poonawalla Fincorp rallied over 5 percent to hit a 52-week high of Rs 520 each on January 19 after the non-bank lender posted a 76 percent on-year rise in profit-after-tax (PAT) in its December quarter (Q3FY24) on the back of better asset quality and interest income.
In the past one month, the stock of Poonawalla Fincorp has surged over 12 percent as against a 0.2 percent rise in the benchmark Sensex.
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Analysts at JM Financial shared a 'buy' rating on the counter, raising the target price to Rs 620 per share from Rs 530, implying an over 19 percent upside from the current levels. "Poonawalla Fincorp is emerging as a formidable player with its unique positioning in product, segment, and operational model, which should translate into superior profitability and thus premium valuations," they wrote in a post-result review analysis.
The brokerage firm expects the lender to deliver 41 percent compounded annual growth rate (CAGR) in earnings over FY23-26 with 4.9 percent or 17.5 percent RoA/RoE in FY26.
On the other hand, analysts at Motilal Oswal reiterated their 'buy' call on the counter, sharing a target price of Rs 580 per share. "We raise our FY26 EPS by 2 percent to factor in lower credit costs. Strong leadership teams, realignment of customer and product segments, and focus on leveraging technology will help the company to build scale and deliver superior risk-adjusted returns," they said.
Poonawalla Fincorp's net interest income (NII) grew by 63 percent on-year, while assets under management (AUM) surged 58 percent YoY in Q3FY24 led by strong market share gains in existing product suite.
Also read: Poonawalla Fincorp Q3 results: PAT rises 76% on-year to Rs 265 crore
However, the lender's net interest margins (NIMs) declined to 11 percent during the quarter due to lower yields from interest income reversals. Going ahead, the management has guided for steady state of NIM at 10 percent.
"In the medium-term, NIM may contract marginally, but we are confident of delivering its RoA guidance," the management said.
On the asset quality front, the lender showcased an improvement with gross non-performing assets (NPA) easing 36 bps and net NPA easing 19 bps on a yearly basis.
The board also approved raising Rs 4,000 crore through issuance of non-convertible debentures on a private placement basis for the financial year 2024-25.
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