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Emerging from the woods
Huge lending opportunity to drive growth despite headwinds
PFC is well placed to leverage the strong demand for financing in the power sector, with
its leadership position and strong domain knowledge. Well matched asset-liability profile
has been cushioning PFC against interest rate r isks; however, r ising compet i t ion and
bulk borrowing rates are likely to impact spreads. We model PAT CAGR of 18% over FY11-
13, supported by lean cost structure and minimal credit cost. Heightened concerns over
SEB losses and expected slowdown in loan growth (due to environment clearance issues)
h a v e l e d t o a s h a r p 4 5% c o r r e c t i o n i n s t o c k p r i c e f r om t h e p e a k . We b e l i e v e c u r r e n t
valuations are attractive at 1.2x FY13E BV. We initiate coverage with a Buy recommendation
and a target price of Rs290 (1.6x FY13E BV), 37% upside.
Visit http://indiaer.blogspot.com/ for complete details �� ��
Emerging from the woods
Huge lending opportunity to drive growth despite headwinds
PFC is well placed to leverage the strong demand for financing in the power sector, with
its leadership position and strong domain knowledge. Well matched asset-liability profile
has been cushioning PFC against interest rate r isks; however, r ising compet i t ion and
bulk borrowing rates are likely to impact spreads. We model PAT CAGR of 18% over FY11-
13, supported by lean cost structure and minimal credit cost. Heightened concerns over
SEB losses and expected slowdown in loan growth (due to environment clearance issues)
h a v e l e d t o a s h a r p 4 5% c o r r e c t i o n i n s t o c k p r i c e f r om t h e p e a k . We b e l i e v e c u r r e n t
valuations are attractive at 1.2x FY13E BV. We initiate coverage with a Buy recommendation
and a target price of Rs290 (1.6x FY13E BV), 37% upside.