PFC Q4 Results Review: Healthy Quarter But Weak Outlook On Loan Growth, Says Motilal Oswal, Maintaining 'Buy'

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Motilal Oswal Report

Power Finance Corporation Ltd. delivered a healthy quarter, supported by robust operational performance across key metrics. Disbursements remained healthy, fueling steady loan growth. Asset quality improved further, aided by the resolution of stressed assets, while net interest margins remained largely stable on a sequential basis.

PFC (standalone) trades at 0.9 times FY27E price/book value and ~5x FY27 P/E, and we believe that the risk-reward is attractive considering decent visibility on loan growth, further stressed asset resolutions, and healthy RoE of 18-19% in FY26-27E.

We reiterate our Buy rating with an SoTP (Mar’27E)-based target price of Rs 485 (based on 1.1x target multiple for the PFC standalone business and Rs 193/ share for PFC’s stake in REC after a hold-co discount of 20%).

Key risks:

1. weaker loan growth driven by higher prepayments;

2. increase in exposure to power projects without PPAs;

3. compression in spreads and margins due to an aggressive competitive landscape; and

4. a slowdown in the offtake of renewable energy projects, driven by weak power demand.

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