Rapid power sector capacity ramp up under the eleventh five year plan offers huge potential to domestic financial institutions like Power Finance Corporation (PFC).
The total capex proposed for additional 78,577 MW of power generation capacity stood at Rs10,316 billion. PFC holds a sizeable 20% market share in the power sector financing segment. The experience and expertise in the space would continue to benefit the NBFC.
PFC has awarded three UMPP out of the proposed nine 4000MW power projects. While the Tilaiya project to be awarded shortly.
We continue to maintain our positive outlook for the company. Strong sanction book of 123% y-o-y growth is an indication of strong loan growth to follow.
We expect 25% growth in the company’s loan book and a 21% growth in net profit. The key earnings drivers for the company would be rapid disbursement growth and firm net interest margin.
We have marginally tweaked our earning estimated in our dividend discount model given the higher interest rate scenario, and higher dividend payout ratio. Factoring this we have marginal reduced our 12-month price target to Rs185 (Rs.193 previously). We reiterate our BUY on the stock.