Power Finance Corporation (PFC) has indicated that the traction in business growth would continue following the strong loan sanction book. However, MTM provision on foreign current loans worth $181 million would have marginal impact on full year profitability going forward.
For FY08, the sanction book of the company grew by 123% to Rs695 billion. We maintain our positive outlook for the company in the light of rapid business growth going forward. We expect that the overall loan book is expected to grow at a CAGR of 24% over the 11th Five year plan.
Our outlook for the company, on the business growth front remains positive. We also believe that the strong growth in the business volume would enhance its profitability going forward. We expect a 21% y-o-y growth in the net profit to Rs14.66 billion for FY09E.
Overall we continue to maintain our earnings estimate and business growth projections. We have revised our price target following a higher beta to Rs215. At the current price, the stock trades at a P/ABV of 1.4x FY09E Adjusted Book Value of Rs88 and 9.7x of FY09 EPS Rs12.8. We maintain a BUY on the stock with a 12-month price target of Rs215.