Poonawalla Fincorp Q4 Review - Operating Profit Inline; Earnings Beat Due To Lower Tax Rate: Motilal Oswal

Motilal Oswal Report

Poonawalla Fincorp Ltd.’s Q4 FY24 net interest income grew 48% YoY to ~Rs 5.6 billion (inline), while its pre-provision operating profit surged 103% YoY to ~Rs 4.1 billion (in line).

Poonawalla Fincorp’s Q4 FY24 profit after tax jumped 84% YoY/25% QoQ to ~Rs 3.3 billion (9% beat), while its FY24 normalized PAT grew 75% YoY to ~Rs 10.3 billion.

Opex rose 12% YoY to ~Rs 2.3 billion (~9% above estimate), with the cost/income ratio being broadly stable QoQ at ~36% (previous year: ~51%). Provisions stood at Rs 240 million (versus estimated credit costs of ~Rs 180 million).

Poonawalla Fincorp is committed to boosting productivity through digitization and is preparing for growth by introducing new products such as co-branded credit cards (to be launched in the next two-three weeks).

Poonawalla Fincorp has laid down a robust foundation for sustainable profitability through initiatives that will lead to lower operating costs (as a % of AUM), higher business volumes, and robust asset quality.

We model a ~37%/39% CAGR for AUM/PAT over FY24-FY26 and expect Poonawalla Fincorp to deliver an return on asset/return on equity of ~4.9%/~19.4% in FY26. Reiterate Buy with a target price of Rs 570 (premised on four times FY26E book value per share).

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