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PTC India Financial Services Stock Code PFS - Analysis

We present below the analysis and updates for PTC India Financial Services Stock Code PFS here and do remember to see the comments below as we will keep updating about this stock under this post.

Higher provisions dent profits, operating performance remains strong: PTC India Financial Services (PFS) reported a weak set of numbers for Q4FY2015, as net profit dipped by 66% YoY on account of an increased provisioning on stressed loans (including a one–off provision of Rs29.72 crore on equity investment). However, its operating performance remained strong as NII grew by 39% YoY and spreads were within the guided levels (4.15% in Q4FY2015).

Slippage from restructured book impacts asset quality: There were Rs77-crore worth of NPA additions (from restructured book) in Q4FY2015 taking the gross NPAs to 1.28% which is comparable with peers. The company proactively provided for stressed loans which shot up provisions (up 503% YoY). Around Rs13.9-crore provision was towards NPA additions, Rs14 crore on a gas-based exposure (presently in restructured category). The company has fully provided for equity investment in RS Wind Energy and has started recovery proceedings. The existing book looks relatively clean and we expect provisioning to normalise going ahead.

Long-term story intact, maintain Buy: PFS has undergone a sharp correction after the results, which factors in the weak performance in Q4FY2015. We believe the operating performance will remain strong due to the vast financing opportunities in the renewable energy segment and healthy spreads (+4% levels). In view of the miss in Q4FY2015 numbers and higher than expected provisions we have revised our estimates downwards resulting in a revised price target of Rs75. Presently, the stock is trading at 1.3x its FY2017E BV which is attractive considering the RoA of 3.4% and RoE of around 20% (FY2017E). We maintain our Buy rating on the stock.

Key risk: While the management has guided for stable asset quality going ahead, the restructured book could have some impact on earnings estimates.

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