Buy Poonawalla Fincorp, target price Rs 310: LKP Securities

LKP Securities has buy call on Poonawalla Fincorp with a target price of Rs 310. The current market price of Poonawalla Fincorp is Rs 233.6. Time period given by analyst is one year when Poonawalla Fincorp Ltd. price can reach defined target.

Poonawalla Fincorp Ltd., incorporated in the year 1978, is a Small Cap company (having a market cap of Rs 17876.26 Crore) operating in NBFC sector.

Poonawalla Fincorp Ltd. key Products/Revenue Segments include Interest, Fees & Commission Income, Lease Rentals, Income From Sale Of Share & Securities for the year ending 31-Mar-2021.



Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 529.46 Crore, up 2.65 % from last quarter Total Income of Rs 515.80 Crore and down -9.82 % from last year same quarter Total Income of Rs 587.14 Crore. Company reported net profit after tax of Rs 118.89 Crore in latest quarter.

Investment Rationale
The brokerage values PFL at ₹310 based on FY24E BVPS of ₹97 with a multiple of 3.2x. In a business where the principal resource is deployable corpus, the induction of Poonawalla Group is an immense advantage. The new promoters, their vision and strategic growth is likely to unlock value for the company. Target segment of high yield loans and better credit underwriting may lead to NIMs expansion and slower credit cost. Therefore the target ROA of ~3.5% is achievable by FY25E. A high growth capital (Tier – 1 of 19.4%) places PFL in a sweet spot.

Promoter/FII Holdings
Promoters held 61.5 per cent stake in the company as of 31-Mar-2022, while FIIs owned 6.58 per cent, DIIs 6.24 per cent.