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On Thursday, CLSA analysts reaffirmed their high-conviction outperform rating and a price target of INR525.00 for Power Finance Corporation (NSE:PWFC) Ltd (POWF:IN). The firm’s fourth quarter fiscal year 2025 net profit rose by 23% quarter-over-quarter, surpassing expectations. This increase was attributed to a margin expansion, particularly due to the recovery from KSK Mahanadi which led to the recognition of interest income.
The positive results included an INR18 billion write-back associated with KSK Mahanadi, although this was balanced by a rise in standard asset provisioning by 30 basis points quarter-over-quarter and a single slippage costing the company INR3.07 billion. Despite these factors, the company’s loan growth forecast for fiscal year 2026 has been revised downward to 10%-11%, in contrast to a robust pipeline of sanctions.
The management of Power Finance Corporation has pointed out current operational slowdowns in the industry, attributed to challenges with rights of way and evacuation facilities, as well as a decrease in power purchase agreements being signed. These issues are reportedly being addressed in discussions with the Ministry of Power.
Based on the revised guidance, CLSA has increased its forecasts for the company by 3-5%. The analysts’ report highlighted the strong project pipeline of power financiers and reiterated their high-conviction outperform rating for Power Finance Corporation, maintaining the target price of INR525. This valuation is based on a projected 1.13 times the book value for the fiscal year 2027.
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