 "Poonawalla Fincorp")
Photo: X/@poonawallafinco
The company’s shares, however, continue to trade lower for the second trading session following the Q1FY25 results. The stock has fallen nearly 2 per cent today and 2.57 per cent this week, and is currently trading at 22 per cent lower from its 52-week high of Rs 519.70, which it touched on January 19 this year.
Poonawalla Fincorp Q1FY25 Results Update
JM Financial, in its report, highlighted that Poonawalla Fincorp reported a strong operational beat of 7.4 per cent as PPoP grew 48 per cent YoY and 6 per cent QoQ to Rs 430 crore led by higher non-interest income (28 per cent QoQ) and improved cost to income of 36 per cent (-34bps QoQ). NII growth was subdued at Rs 580 crore, up 37 per cent YoY and 2.4 per cent QoQ as NIMs (calculated on AUM) declined 72bps QoQ to 8.9 per cent. Credit costs stood higher at Rs 44.5 crore (68bps of AUM vs 41bps QoQ) which led to an in-line PAT of Rs 290 crore, up 46 per cent YoY and down 12 per cent QoQ.
“Poonawalla Fincorp continued its strong AUM growth (+52 per cent YoY, +8 per cent QoQ), led by personal and consumer loans (+52 per cent YoY, +8 per cent QoQ) while secured business also grew at a healthy pace (LAP – +60 per cent YoY, +13 per cent QoQ, pre-owned car – +33 per cent YoY, 3.5 per cent QoQ). Asset quality improved as GS3/NS3 declined to 0.67 per cent/0.32 per cent (-75bps/-49bps QoQ) respectively. PCR on stage-3 inched up to 52.4 per cent (+302bps QoQ),” quoted the brokerage report.
Poonawalla Fincorp’s new MD & CEO highlighted the broad strategic direction for the company with incremental investments going towards strengthening collection infrastructure, presence, and credit and analytics. The brokerage believes that this is likely to entail higher opex in the near term. “Management has indicated the launch of 4 new products, namely, consumer durables, shopkeeper loans, prime personal loans, and used CVs and has ambitious plans to scale up AUM by 5-6x over the next 4-5 years (implying a 38 per cent CAGR). PFL has also undergone a significant rejig in its senior leadership team (largely from HDFC Bank),” cited the brokerage report.
As the change in business strategy plays out, we closely watch for the execution and stabilization of the emerging return profile for Poonawalla Fincorp, said the brokerage. Another pertinent fact, as per the brokerage, is that Poonawalla Fincorp has not seen any asset quality deterioration despite concerns on unsecured loans which should calm nerves around balance sheet risks.
Should you Buy, Sell, or Hold Poonawalla Fincorp shares?
JM Financial has maintained the Buy rating on Poonawalla Fincorp’s stock and said, “We build incremental opex of Rs 200 crore over FY25E/26E and expect growth to accelerate FY26 onwards. This results in revised RoA/RoE of 4.24 per cent/4.3 per cent for FY26 in our estimates.”
The brokerage has revised the target price of Poonawalla Fincorp shares to Rs 535. JM Financial has, however, cautioned that the inability to scale up newer products or a significant slowdown in growth trajectory are key risks.
First Published: Jul 23 2024 | 11:35 AM IST
