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ICICI Securities: PFC - Myth And Lore Outweigh Reality And Certainty; Alluring Valuations

ICICI Securities: Power Finance Corporation - Myth And Lore Outweigh Reality And Certainty; Alluring Valuations

Power lines hanging from transmission towers in Delhi (Photographer: Udit Kulshrestha
Power lines hanging from transmission towers in Delhi (Photographer: Udit Kulshrestha

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

ICICI Securities Report

For Power Finance Corporation Ltd., we believe, myth and lore have far outweighed reality and certainty, leading to underperformance (of 10-20% over one year and three years) as well as steep valuation discount (trading at approximately 0.5 times book).

In our initiating coverage on Power Finance Corporation, we attempt to address several myths (with facts) and simultaneously, bring to the fore structural power sector reforms and visibility on its potential earnings power and dividend payout capability.

Given balance sheet expansion of more than 10%, steady state return on equity profile of more than 14%, dividend yields of approximately 10%, more than offsetting slower than anticipated stress resolution and weakening health of utilities, we assign fair multiple of 0.75 FY22E book to Power Finance Corporation.

Click on the attachment to read the full report:

ICICI Securities Power Finance Corporation Initiating Coverage.pdf

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