We spoke to the management of Power Finance Corporation (PFC) to discuss business outlook and key challenges in the present macro-economic environment.
Although the advances growth is on track, we believe that the currency fluctuations will impact PFC’s bottomline.
NIM is expected to remain firm, while currency fluctuation is expected impact its profitability.
We have revisited our estimates to factor in higher loan growth as indicated by the management; we have also lowered our net profit for FY09 and FY10 to factor in the impact of provision pertaining to currency fluctuations.
Valuation at the current price level appears rich, with a RoE of 15.6% and P/ABVx of 1.5x base on FY10 earnings estimate. The stock has witnessed run up since our previous recommendation.
We are recommending a REDUCE (earlier Accumulate), following a change in estimates, with a lowered price target of Rs145 (earlier Rs155).