Buy PTC India Fin; target of Rs 49: Axis Securities

In Q4FY16, PTC India Finance (PFS) reported PAT growth of 210% YoY at Rs 49 cr which was led by 19% YoY decline in provisions due to stable asset quality as GNPA % declined by 212 bps YoY. Loan book grew by 35% to Rs 8,634 cr, management maintained their guidance of 30-40% loan book growth for next 2-3 years led by renewable energy. PFS’s NII during the quarter was up by 28% at Rs 115 cr led by 35% YoY loan book growth and decline in margins by 27bps YoY to 5.76%. With 55% decline in operating expenses resulted in decrease in Cost to Income ratio. PFS’s cost of funds declined by 35bps YoY to 8.95% due to lower cost of funds from banks as well as financial institutions. Asset quality remained largely stable with GNPA % declined by 212bps YoY to 3.40% in Q4FY16.

PFS’s focus on renewable energy to drive loan book growth along with stable asset quality. Thus it should enable company to deliver 2.6‐2.7% RoA and 16‐17% RoE on ongoing basis. We expect PFS’s business to grow rapidly over next couple of years with loan book growth of 29% CAGR (FY16-18E) and PAT earnings growth of 30% CAGR (FY16-18E).At CMP the stock trades at 1.0x FY18E P/BV. We value PFS at FY18E P/BV multiple of 1.2x to arrive at target price of Rs.49 and continue to have BUY rating.