Government’s thrust on ramping up power generation capacity under the eleventh five year plan will lead to strong traction in PFC’s advances. We expect advances growth of 24% y-o-y to Rs798 billion for FY10.

PFC has transferred 4 UMPPs during FY09, while bid applications for three UMPPs are expected to open during FY10. PFC charges consultation fees of Rs150 million for each project transferred to the bidder.

PFC will provide all advisory and consultancy services under the Restructured Accelerated Power Development and Reform Program (RAPDRP) - for which it will be entitled for consultation and advisory fees of 1% of the assistance provided.

PFC will also participate in the funding requirement for the infrastructure set up. PFC has sanctioned Rs19.5 billion and disbursed loans amounting to Rs3.25 billion.

Valuation

In the backdrop of improved liquidity conditions and better operating conditions we opine that PFC’s NIM will remain stable at 3.7%.

We have marginally tweaked our earnings estimates given the improved loan growth outlook and stable net margins. The stock at the current price appears fairly valued and we continue to maintain our REDUCE recommendation on the stock with a price target of Rs210.