Buy PTC India; target Rs 55: ICICIdirect

ICICIdirect.com's report on PTC India Financial ServicesNII grew 25% YoY to Rs 97.4 crore, above our estimate of Rs 89 crore due to higher-than-expected spreads at 4.58% in Q1FY16. Lower slippages QoQ led to 44 bps improvement in NIM to 6.47% in Q1FY16.Total income was up 26.9% YoY, in line with our estimate at Rs 106 crore as lower-than-expected other income offset higher-than-expected NII. Fee income grew 54% YoY to Rs 8.6 crore from Rs 5.6 crore in Q1FY15After a spike owing to slippages in three accounts in Q4FY15, provision came in lower-than-expected at Rs 1.2 crore (I-direct estimate - Rs 15 crore). PAT, therefore, came in above our expectation at Rs 61.4 crore (I-direct estimate: Rs 48 crore)Asset quality witnessed improvement with 4 bps QoQ dip in GNPA to 1.24%. NNPA improved 3 bps QoQ to 0.97%"We believe the opportunity to grow in the renewable energy project financing remains large. PFS has been able to set itself up as a niche player in the same. RoA, RoE still remain healthy and are expected at 3.7%, 17.4% in FY17E, respectively, aided by double digit PAT growth. With moderate credit growth in Q1FY16 and increased competition from banking peers ahead, marginal pressure is anticipated on NIM. Consequently, we maintain our target price at Rs 55 valuing the stock at the 1.5x FY17E ABV. We maintain our BUY recommendation on the stock", says ICICIdirect.com research report.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More