Reduce Poonawalla Fincorp: target of Rs 410: Emkay

Emkay's research report on Poonawalla Fincorp

Poonawalla reported a good quarter, with profit, AUM growth, asset quality, and credit cost broadly in-line-to-slightly-better than consensus/our estimates. The arrival of new MD & CEO Arvind Kapil has brought along a number of senior professionals from HDFC Bank and other banks, aimed at building second-layer capabilities, broadly replacing the existing one. Kapil has well-articulated his vision to grow AUM by 5-6x over the next 5-6 years, with PAT growth tracking AUM growth. Sustainability, and predictability of growth and profitability remain at the core of the strategy, to achieve which the product (secured/unsecured), distribution (digital and physical), people, and tech capabilities are being aligned. Though the strategic vision is impressive, such strategic realignment and execution will take some time to justify the current
premium valuation.

Outlook

We reiterate our REDUCE rating on the stock, with Jun-25E TP of Rs410/sh (Rs440 earlier), implying a multiple of 3.0x FY26E P/BV.