Power Finance Corporation - High Dividend Yield, Low Valuations Adds To Comfort: HDFC Securities
In FY22, the company was conferred ‘Maharatna’ status by Government of India, the highest recognition for a public sector company.
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HDFC Securities Retail Research
Since the past few quarters, Power Finance Corporation Ltd. has been able to deliver strong growth momentum along with considerable improvement in the asset quality.
Also the emerging trend in the power sector gives us comfort about the company’s ability to keep growing at a fast growth rate. We have envisaged 2% compound annual growth rate growth for top line and 9% for bottom line, while loan book is estimated to grow at 5.5% CAGR over FY24-24E.
We feel that worst in terms of asset quality deterioration in power finance segment is over. There could be higher recoveries in the next two years than slippages.
Further PFC is also holding sufficient provisions. Return on average asset is estimated at 2.7% for FY24. In the medium term, credit cost normalisation and cost control remains the key drivers for stable return on asset and return on equity.
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