Power Finance: Margins are likely to remain largely stable
- Motilal Oswal expects Power Finance Corporation (POWF) to post healthy loan growth of ~27% YoY and ~2% QoQ.
- Margins are likely to remain largely stable on a sequential basis.
- After marked-to-market (MTM) write-backs in the last two quarters, MTM loss of Rs400m is expected in 1QFY13 due to steep Rs depreciation.
- Asset quality is a key monitorable, given the uncertain macro environment. Motilal OSwal conservatively factors in provisions of Rs500m for the quarter.
- The stock trades at 1x FY13E and 0.9x FY14E BV, and 6.4x FY13E and 5.7x FY14E EPS. Maintain Buy.
- Key things to watch for: (1) Management's outlook on business growth and asset quality, (2) Movement in spreads.
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Motilal Oswal was founded in 1987 as a small sub-broking unit, with just two people running the show. Today it has a 2000 member team with a networth of Rs7 bn and market capitalization as of March 31, 2008 at Rs19 bn.
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