Power Finance Corporation–Accumulate- Kotak Securities
Power Finance Corporation sanction and disbursement growth remained healthy during 4QFY10, advances book grew by 24% y-o-y to Rs798.6bn for FY10.
Core performance was slightly lower than our expectation; impacted by repricing of assets at relatively lower rates. They have strong net profit growth of 53% y-o-y and 6.6% q-o-q, better than our expectation; previous year earnings include deferred tax liability write back amounting to Rs480 crore.
Applying for a Infrastructure Finance Company (IFC) NBFC status- needs to augment capital to expand exposure limits by 5%. At the current market price, the stock trades at P/Ex of 11.5x and P/ ABVx of 2.2x its FY11 earnings estimates. We are revising our price target for the stock to Rs270 (earlier Rs.245), based on dividend discount model and recommend accumulating the stock at declines.
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