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Poonawalla Fincorp jumps 6% on record net profit in Q3; up 24% in a month

Earlier, brokerage firm Motilal Oswal initiated coverage on the stock with a buy rating and a target price of  ₹350 apiece, citing growth opportunities. (unsplash.com)Premium
Earlier, brokerage firm Motilal Oswal initiated coverage on the stock with a buy rating and a target price of 350 apiece, citing growth opportunities. (unsplash.com)

On Monday, the company reported its highest-ever net profit of 150 crore in Q3FY23, an increase of 88% when compared to a net profit of 80 crore in Q3FY22. Following the strong performance, the stock rose 6.13% to 307.80 in Tuesday's trade.

Following the company's December quarter numbers, which came in line with analysts' expectations, shares of Poonawalla Fincorp, an NBFC, rose sharply in Tuesday's trade, pushing the stock price to a two-week high.

The stock began the trading session strongly at 300 apiece, and it continued to climb up to hit an intraday high of 307.80, a 6.13 percent rise compared to the stock's previous closing price of 290. On the BSE, at 11:30 a.m., the stock was trading at 305, up 5 percent.

In the last one month, the stock delivered a return of 24 percent, while in the last one year, it rallied 15 percent. Additionally, in the past three years, the stock has grown by 37 percent, going from 64.60 apiece to its current price of 305.

Stock price chart of Poonawalla Fincorp.
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Stock price chart of Poonawalla Fincorp. (Tradingview)

On Monday, the company reported its highest-ever net profit of 150 crore in Q3FY23, an increase of 88 percent when compared to a net profit of 80 crore in a similar quarter of last fiscal year. Sequentially, the net profit was up by 15.38 percent.

The net profit of the company has been growing consistently for the last seven quarters. It reported a net profit of 123.7 crore in Q1FY23 and 130.2 crore in Q2FY23.

The revenue from operations in Q3FY23 came in at 519 crore as against 394 crore a year ago, a growth of 31.75 percent. While, the operating profit increased by 51.35 percent YoY to 358.2 crore in Q3FY23 from 236.7 crore in Q3FY22.

The company's assets under management (AUM) grew 28 percent YoY and 6 percent sequentially to 13,929 crore. The NBFC also recorded its highest-ever quarterly disbursements at Rs.3,369 crore in Q3FY23, up by 157 percent YoY and 8 percent QoQ.

Furthermore, the company achieved its highest-ever RoA of 4.50 percent during the quarter, up 158 basis points (bps) year on year and 46 bps quarter on quarter.

On asset quality, the gross non-performing assets (NPAs) fell to 1.69 percent, down by 236 bps year-on-year. The net NPAs stood at 0.89 percent, 108 bps lower.

Earlier, brokerage firm Motilal Oswal initiated coverage on the stock with a "buy" rating and a target price of 350 apiece, citing growth opportunities.

In the bull case scenario, Poonawalla Fincorp stock price is projected to scale to 450 per share, while in the bear case scenario, Motilal sets the target price of 250 apiece.

"The company has rapidly transformed into a "digital-first" organisation whereby it has reconciled the physical and digital initiatives to widen its footprint without having to increase the branch distribution, employee count, or operating costs proportionately."

"PFL will eventually transform its distribution model from a DSA-driven model to one of direct sourcing," said the brokerage.

With new promoters on board, PFL’s access to liabilities rose multifold, and it was able to achieve credit rating upgrades that resulted in a significant decline in the cost of borrowing (down 190 basis points over the last 12 months) with a better and more diversified liability mix. This enabled PFL to refocus on better credit-quality customers and realign its product suite to generate superior risk-adjusted returns, the brokerage added.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

NBFCs give higher interest on deposits but there are risks involved too,
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NBFCs give higher interest on deposits but there are risks involved too,
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