Sharekhan's research report on PTC India FinPTC India Financial Services (PFS) reported a 454% growth in net profit largely driven by one-off income of Rs206.9 crore on sale of investment (Ind-Barath stake). However, adjusting for one-off gains the PBT declined by 9.6% YoY. The provisions increased significantly due to rise in NPAs and additional provisions on existing stressed accounts which affected core earnings. The NII growth was slower (up 12.9% YoY) and spreads contracted (down 81BPS YoY to 3.57%) due to interest reversals on NPAs (Rs15 crore).We have revised our price target downwards to Rs62 after accounting for deterioration in asset quality and lower target multiple (1.8x from 2.3x earlier to factor in the rising risk of further slippages). On core business front, PFS loan book growth remains strong given the loan pipeline (sanctioned) of around Rs5,500 crore (as against the current advances book of ~Rs7,200 crore). Moreover, the outlook for investment in the renewable energy sector and PFS’ high capital adequacy ratio (25.2%) provides platform for strong growth. We believe, the company can deliver RoA in the range of 2.5-3.0% over the next couple of years given the strong NII growth and lower operating cost. We therefore have maintained our Buy rating on the stock.
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