February 15, 2017 / 16:35 IST
Power Finance Corporation’s (PFC) Q3FY17 core operating performance was below estimates with forex gains supporting overall profitability. Revenue momentum was below estimate (NII down >1% YoY) following muted loan growth (up <3% YoY/flat QoQ, partially on repayment of AP under UDAY to the tune of INR 25bn) and NIMs decline (pressure on lending yields).
Outlook
Going ahead, there are further repayment dues under UDAY which will exert further pressure on growth and NIMs. Asset quality improved marginally with GNPLs at 3.07% (3.21% in Q2FY17) and restructured book at INR 294bn (INR 299bn in Q2FY17). Despite favourable valuations (0.9x FY19E P/ABV), near- to medium-term challenges and uncertainties relating to riskier impaired loans could test high returns profile. Maintain ‘HOLD’.
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