Power Finance Corporation
Power Finance Corporation's advance book recorded a strong growth of 25% for FY09 to Rs. 644bn as compared to Rs. 515bn in FY08. Improved disbursement growth of 30% during FY09 to Rs 210bn, fostered the enhance business growth.During Q4FY09 disbursements growth remained healthy at 7.2% to Rs.69bn as compared to Rs. 65bn in the previous year. Sanctions, on the other hand reported a deceleration in growth trend following the higher base in Q4FY08.
PFC's major source of funding has been bulk borrowings, which are available at relatively softer interest rate, and hence helped contain cost of funds, which stood at 8.78% during Q4FY09.
For FY09, its NIM improved to 3.84%, which lead to a FY09 NII growth of 22% yoy to Rs. 23bn as compared to Rs 18bn. Further, close to Rs.70-80bn worth of loans would come up for repricing, (due under the 3 year re-set clause) during FY10. These loans were disbursed during FY07 when the interest rates were hovering around the same level, and this leaves lesser room for further improvement in margins.
Net profit growth healthy, however, impacted by higher MTM losses. PFC's Net profit grew by 32% yoy during Q4FY09 to Rs. 3.9bn as compared to Rs.2.9bn. Profits on certain forex loan repayments helped restrict the MTM lossed during Q4FY09 to Rs. 0.4bn following rupee depreciation.
PFCs invested in power exchange along with NTPC and TCS.
Valuations
In the backdrop of robust power sector investment during the eleventh five year plan, long-term outlook for PFC is positive. At the current market price, the stock trades at 10.9x its FY10E P/Ex and 1.6x its FY10 P/ABVx. Investors can buy on declines with a price target of Rs. 180.
Power Finance Corporation's advance book recorded a strong growth of 25% for FY09 to Rs. 644bn as compared to Rs. 515bn in FY08. Improved disbursement growth of 30% during FY09 to Rs 210bn, fostered the enhance business growth.During Q4FY09 disbursements growth remained healthy at 7.2% to Rs.69bn as compared to Rs. 65bn in the previous year. Sanctions, on the other hand reported a deceleration in growth trend following the higher base in Q4FY08.
PFC's major source of funding has been bulk borrowings, which are available at relatively softer interest rate, and hence helped contain cost of funds, which stood at 8.78% during Q4FY09.
For FY09, its NIM improved to 3.84%, which lead to a FY09 NII growth of 22% yoy to Rs. 23bn as compared to Rs 18bn. Further, close to Rs.70-80bn worth of loans would come up for repricing, (due under the 3 year re-set clause) during FY10. These loans were disbursed during FY07 when the interest rates were hovering around the same level, and this leaves lesser room for further improvement in margins.
Net profit growth healthy, however, impacted by higher MTM losses. PFC's Net profit grew by 32% yoy during Q4FY09 to Rs. 3.9bn as compared to Rs.2.9bn. Profits on certain forex loan repayments helped restrict the MTM lossed during Q4FY09 to Rs. 0.4bn following rupee depreciation.
PFCs invested in power exchange along with NTPC and TCS.
Valuations
In the backdrop of robust power sector investment during the eleventh five year plan, long-term outlook for PFC is positive. At the current market price, the stock trades at 10.9x its FY10E P/Ex and 1.6x its FY10 P/ABVx. Investors can buy on declines with a price target of Rs. 180.
Yes, it is a very good stock for long term.
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