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Nirmal Bang Report
Poonawalla Fincorp Ltd.'s Q2 FY24 performance was in line with our expectations, with net interest income/pre-provision operating profit coming in at a variation of 2.8%/2.6% on the back of strong assets under management growth of 54% YoY and 106 basis points YoY/2 bps QoQ expansion in net interest margin.
Opex improved YoY, backed by a digital operating model and profit after tax was inflated on account of a one-off gain of Rs 12.2 billion from the sale of Poonawalla Housing Finance Ltd. investment.
Poonawalla Fincorp's asset quality improved with gross stage-III/net stage-III ratio at 1.36%/0.72% versus 1.42%/0.76% in Q1 FY24. Provision coverage ratio stood at 47.2% and the company beefed up provisions in the quarter.
We revise our FY24/FY25 estimates upward on the back of higher NIM and favourable operating leverage. FY24E profit after tax surges due the PHFL transaction.
We roll forward our valuation to September2025E adjusted book value of Rs 122, keeping the target multiple at 3.2 times which gives us a target price of Rs 390 (as against Rs 438 earlier valued at three times June FY25E adjused book value), reflecting an upside potential of 4%. Revise rating to ‘Accumulate'.
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