PFC share rises 5% as Q3 profit zooms 23%; Analysts positive on Q4 growth

Motilal Oswal sees decent visibility for loan and earnings growth, as well as continued progress on stressed asset resolutions

Power Finance Corporation (PFC), a state-owned financial services company, delivered robust results for the third quarter of financial year 2025 (Q3FY25), with a 23 per cent rise in consolidated net profit at Rs 7,759.6 crore, up from Rs 6,294.4 crore in the same period last year. 

 

On the bourses, PFC share price today rose up to 4.60 per cent to hit an intraday high of Rs 390.50 per share.

 

A key highlight of the quarter was a healthy 12.9 per cent Y-o-Y growth in Net Interest Income (NII), which rose to Rs 4,694 crore from Rs 4,158 crore in the previous year. 

 

 

Despite facing a challenging operating environment, PFC maintained stable asset quality, with Gross Non-Performing Assets (GNPA) improving slightly to 2.68 per cent from 2.71 per cent in the prior quarter. Similarly, Net NPA stood at 0.71 per cent, slightly better than the 0.72 per cent recorded in Q2FY25.

 

Nonetheless, management remained optimistic, expecting a strong recovery in Q4. PFC’s leadership cited advanced stages of resolution for some stressed assets, including a major project with a borrower involved in three waste-to-energy initiatives, whose exposure of Rs 130 crore had slipped to Stage-3. Furthermore, the KSK Mahanadi project, which was under stress, is on track for full principal recovery, with a potential write-back of provisions.

 

PFC also declared a third interim dividend of Rs 3.50 per equity share for FY25. The record date for eligibility is set for February 28, 2025, with the dividend payout scheduled for March 3, 2025.

 

Analysts’ view

 

Emkay analysts noted that PFC had a satisfactory quarter, with stable margins and credit costs. However, they observed that the loan growth was a tad below expectations due to weaker disbursements and higher repayments. 

 

Despite this, the brokerage remained optimistic about a strong Q4 performance, boosted by progress in resolving stressed assets. The management maintained its 14 per cent growth guidance, with the expected strength in disbursements in power generation (both conventional and renewable), distribution, and the Revamped Distribution Sector Scheme (RDDS). Although Emkay revised its target price down by 8 per cent to Rs 550, from Rs 600, it maintained a ‘Buy’ rating on the stock, factoring in the company’s stable margins and healthy asset quality.

 

Motilal Oswal, while also reiterating a ‘Buy’ rating, stressed upon PFC’s attractive valuation, with the stock trading at 0.8x FY27E P/BV and a P/E ratio of 4x for FY27. 

 

The brokerage sees decent visibility for loan and earnings growth, as well as continued progress on stressed asset resolutions. They have set a target price of Rs 475, factoring in a hold-co discount for PFC's stake in Rural Electrification Corporation (REC). 

 

However, analysts at Motilal Oswal raised concerns over potential risks, including increased exposure to private infrastructure projects, the possibility of lower-quality power projects without Power Purchase Agreements (PPAs), and pressures on margins due to competitive intensity in the sector.

 

UBS, too, maintained a ‘Buy’ rating, but reduced its target price from Rs 670 to Rs 600, according to reports. The brokerage highlighted that while PFC's profit after tax (PAT) came in ahead of estimates, the company missed slightly on assets under management (AUM) growth. 

 

UBS noted that the stock looks attractively priced, with early teens loan growth expected to continue. 

 

The company has not experienced any major impact from delays in power sale agreements, and UBS expects disbursements to pick up in Q4, which should support growth for the remainder of the fiscal year.

 

That said, while analysts acknowledge some headwinds, particularly in terms of slightly weaker loan growth in Q3, they remain generally positive on PFC's prospects. 

 

The company’s strong profitability, stable asset quality, and promising outlook for Q4 provide a strong foundation for future growth. PFC’s efforts to resolve stressed assets and maintain healthy margins despite challenges are viewed favourably, with most brokerages maintaining ‘Buy’ ratings, albeit with slightly revised target prices.