Buy Poonawalla Fincorp; target of Rs 555: KR Choksey

KR Choksey's research report on Poonawalla Fincorp

Poonawalla Fincorp reported a decent set of numbers with continued robust business momentum and improvement in asset quality. Net Interest Income (NII) for Q4FY24 increased by 48.1% YoY (+14.6% QoQ) to INR 5,625 Mn. The Profit after tax for Q4FY24 has shown a significant increase of 83.6% YoY (25.1% QoQ) to INR 3,317 Mn. However, the net profit was higher than our estimates, primarily due to a lower tax rate. In view of the future growth of the Company, the Board of Directors has decided to conserve capital and therefore, no final dividend was declared for FY24.

Outlook

We assign a P/ABV multiple of 4.0x to FY26E ABVPS of INR 138.7 per share and revise our target price to INR 555/share (Previous target: INR 580), as we reduce our Adj. Book value by 2.1% for FY26E. Thus, the potential upside is 18.3%, and accordingly, we have retained our “BUY” rating for Poonawalla Fincorp Ltd.

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