scorecardresearchPoonawalla Fincorp has rallied over 1000% in 2 years; Is it still a buy?

Poonawalla Fincorp has rallied over 1000% in 2 years; Is it still a buy?

Updated: 03 Aug 2022, 10:51 AM IST
TL;DR.

In the last 1 year, the stock has advanced 64 percent since completing its merger with Magma Fincorp. It has added 17 percent in July 2022. In the 2 trading sessions of August, it has risen 7 percent.

In the last 1 year, the stock has advanced 64 percent since completing its merger with Magma Fincorp. It has added 17 percent in July 2022. In the 2 trading sessions of August, it has risen 7 percent.

In the last 1 year, the stock has advanced 64 percent since completing its merger with Magma Fincorp. It has added 17 percent in July 2022. In the 2 trading sessions of August, it has risen 7 percent.

Shares of Poonawalla Fincorp have given spectacular returns to its investors in the last 2 years. From trading around 25 in July 2020, the stock has skyrocketed over 1,000 percent to 285 currently.

In the last 1 year, the stock has advanced 64 percent since completing its merger with Magma Fincorp. It has added 17 percent in July 2022. In the 2 trading sessions of August, it has risen 7 percent.

The recent surge came on the back of robust results announced by the financial services firm in the June quarter. The company's consolidated net profit more than doubled to 141 crore in Q1FY23 led by an improvement in net interest margins (NIMs) as against a profit of 64.5 crore in Q1FY22. This indicates a jump of 118 percent in the net profit in the June quarter.

Its total income also rose to 572 crore in the quarter under review from 483 crore in the year-ago period. The company's NIMs were up by 155 basis points YoY to 9.5 percent.

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Poonawalla Fincorp stock price trend

The company's assets under management (AUM) rose over 22 percent YoY in Q1FY23 to 17,660 crore and 6.5 percent sequentially. Its disbursements stood at 3,436 crore in Q1FY23, growing by 98.3 percent YoY and 3 percent QoQ.

The share of discontinued products declined to 13 percent of the total AUM vs 44 percent in Q1FY22 and 18 percent in Q4FY22, noted the firm.

The company's asset quality also showed improvement with gross non-performing assets (GNPAs) moderating to 2.19 percent in the June quarter from 5.38 percent a year ago and net NPAs to 0.95 percent from 2.71 percent in the year-ago period. The company also reported a healthy provision coverage ratio of 57 percent.

Magma Fincorp in July last year announced the acquisition of a controlling stake by Adar Poonawalla-led Rising Sun Holdings Private Limited and changed its name to Poonawalla Fincorp effective July 22, 2021. Poonawalla Fincorp Limited, a non-banking financial company, provides asset finance services in India.

Post the exceptional results by the NBFC, brokerage house Nirmal Bang, in a report, said that it has a 'buy' call on the stock with a target price of 314.

“PFL’s strong capital adequacy buffer (46 percent+) and advantage of low CoB provides it an edge to achieve its FY2025 vision of tripling its AUM," said the brokerage.

It noted that the company consolidated its leadership position in Pre-owned Cars and Loans to Professional segments. Asset quality on new business segments also remained better than management expectations, with 30+ book at less than 0.3 percent, it added. With run-down in the discontinued book, credit cost is likely to remain in the range over the medium term, the brokerage predicts.

It expects RoA (return on asset) and RoE (return on equity) of 2.7 percent and 9.4 percent, respectively by FY24E.

The company has an active customer base of nearly 7600 as of FY22. It has an active presence in Housing loans, Business loans, Pre-owned car loans and General Insurance.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

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First Published: 03 Aug 2022, 10:51 AM IST