Power Finance Corporation - Healthy Operating Performance Continues - Motilal Oswal

POWER FINANCE 3QFY11: Healthy operating performance continues; Loan book up 26%; NII up 24%; Adj PAT up 22%

Loan book (ex-accrued interest) grew 25.6% YoY and 3.5% QoQ to Rs910b. Sanctions for 3QFY11 were Rs178b as against Rs42.5b in 3QFY10.

Generation segment continues to be the major constituent of loan book at 84.6%. T&D segment comprise 12.2% while other loans are 3.3%.

Healthy business growth and improvement in spreads on a YoY basis led to 24% YoY growth in NII at Rs9.3b (up 3.3% QoQ).

Spreads improved by 22bp YoY to 2.73% (vs 2.71% in 2QFY11) while NIMs declined 8bp YoY to 4.09% (stable QoQ).

CAR at the end of 3QFY11 stood at 17.3% against the minimum required 15%. Asset quality remains strong with GNPAs of Rs130m (0.01%) and NNPA at Nil.

Motilal Oswal expects PFC to report EPS of Rs23.5 for FY11 and Rs25.6 (diluted) for FY12E. Book value is expected to be Rs133.6 and Rs171.9 respectively. While RoA would remain healthy at 3%+, RoE would be lower ~17.5% on account of equity raising. Stock trades at 10.6x FY12E EPS and 1.6x FY12E BV after factoring in equity raising. Not rated.

Source : Equity Bulls

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