Stock in Action – Power Finance Corporation 11 November 2024

Highlights

1. PFC’s Q2 2024 results reflect a strong 9% rise in net profit, highlighting steady financial growth.

2. A recent analysis of Power Finance Corporation stock shows strong momentum, supported by disbursement growth & stable asset quality.

3. Analysts have set a promising target for PFC’s share price, with projections reaching up to ₹680.

4. PFC’s board declined a significant loan proposal from the Shapoorji Pallonji Group, citing careful consideration of sector exposure.

5. In Q2 2024, PFC’s disbursements grew by 45% yearoveryear, marking a substantial rise in lending activity.

6. As of September 2024, PFC’s net profit stood at ₹7,214.90 crore, driven by increased revenues.

7. The company’s asset quality continues to improve, with Gross NPAs dropping to 2.62% this quarter.

8. PFC share price surged this week as the company posted strong Q2 results.

9. Power Finance stock price has seen steady growth, supported by improved disbursements & asset quality.

10. PFC stock remains a favourite among analysts, with targets as higher than ₹650 as per the brokerage houses i.e. Bernstein.

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Why is PFC Share in News? 

Power Finance Corporation (PFC) shares recently surged over 2% after the release of the company's Q2 results, which highlighted strong disbursement growth, improved asset quality, & consistent loan sanctions. The stock gained further attention as multiple brokerages reiterated their bullish stance, citing favourable financial stability & growth prospects. With all ten analysts covering the stock maintaining a buy recommendation, PFC’s shares are expected to climb higher. Brokerages including CLSA, Bernstein, UBS, & DAM Capital see potential price targets ranging from ₹610 to ₹680, reflecting optimism about the company’s performance & valuation. 

Highlights of PFC’s Q2 Financial Performance

• In the September quarter, PFC reported a consolidated net profit of ₹7,214.90 crore, a 9% increase from ₹6,628.17 crore in the previous year, driven by higher revenues. 

• Total income rose to ₹25,754.73 crore from ₹22,387.32 crore in the same period last year. 

• For the first half of FY25, the consolidated Profit After Tax (PAT) increased by 14% to ₹14,397 crore, with consolidated net worth also seeing a robust 17% rise to ₹1,45,158 crore. 

• The company’s Assets Under Management (AUM) grew by 9.8% yearoveryear, reaching ₹4.93 lakh crore by Septemberend.

PFC’s Operating Highlights

• PFC’s disbursements increased by an impressive 45% yearoveryear, reaching ₹47,633 crore in the September quarter, more than doubling sequentially. 

• Loan growth, although slow, remains steady, with a focus on sectors like conventional generation. 

• A significant improvement was noted in asset quality, with Gross NPA decreasing from 3.38% to 2.71% quarter over quarter, & Net NPA reducing from 0.87% to 0.72%. 

• These improvements, along with writebacks from legacy assets, kept credit costs negative, bolstering profitability. 

• PFC’s board also approved a second interim dividend of ₹3.50 per share, with November 25, 2024, set as the record date.

The Deal with Shapoorji Pallonji Group

PFC recently made headlines with its decision to decline a ₹20,000crore loan proposal from the Shapoorji Pallonji (SP) Group. This move, following extensive due diligence, indicates PFC’s cautious approach towards high exposure in new sectors. PFC’s decision not to proceed may impact SP Group's debt repayment plans, but SP has started exploring other financing structures & consortium lending arrangements as alternatives. The SP Group acknowledged PFC’s concerns & is considering involving additional global investors for future financing deals.

Conclusion

PFC’s strong Q2 performance has reinforced investor confidence, as evident in the positive market reaction & bullish outlook from leading brokerages. With notable growth in disbursements, enhanced asset quality, & prudent lending practices, PFC’s financial & operational metrics remain resilient. The board’s prudent approach in high-risk lending highlights the company’s focus on stability while leveraging growth opportunities in core segments. PFC continues to show potential for longterm value, making it an attractive stock in the power financing sector.