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Investing.com - CLSA has lowered its price target on Power Finance Corp Ltd (POWF:IN) to INR495 from INR540 while maintaining a High-Conviction Outperform rating.
The revision follows Power Finance’s second-quarter fiscal year 2026 results, where net interest income came in 3% below CLSA’s estimates. Pre-provision operating profit and profit after tax showed larger misses due to foreign exchange losses on foreign currency borrowing.
Loan growth moderated to 14% year-over-year in the quarter, down from 16% in the first quarter. CLSA expects this trend to continue, with growth potentially slowing to 10%-11% by the fourth quarter of fiscal year 2026. The power segment showed low double-digit loan growth, while infrastructure lending growth was strong but from a low base.
The company’s calculated net interest margin declined 20 basis points due to lower yields on loans, partially offset by a decrease in funding costs. Asset quality remained largely stable with gross non-performing loan and net non-performing loan ratios at 1.9% and 0.4% respectively.
CLSA has trimmed its estimates by 4%-5% for calendar years 2026-2028, with the new price target of INR495 representing 1x September 2027 price-to-book value. The firm noted that Sinnar Thermal, a key account under National Company Law Tribunal resolution, has submitted a final plan for approval.
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