Poonawalla Fincorp shares climb 6% after Q3 results. Motilal Oswal has target of Rs 350 on stock

Shares of Poonawalla Fincorp climbed 6 per cent in Tuesday's trade after the NBFC's December quarter operational performance came in better than analyst estimates. Poonawalla Fincorp reported an 88 per cent surge in net profit at Rs 150 crore for the December quarter compared with Rs 80 crore in the year-ago period. Total income rose to Rs 519 crore compared with Rs 394 crore in the year-ago quarter, with net interest margin improving 94 basis points to 10.7 per cent.

Motilal Oswal said Poonawalla Fincorp has laid down a robust foundation for sustainable profitability through initiatives that will lead to lower operating costs, higher business volumes and robust asset quality.

"The company has strong moats on the liability front, supported by its strong parentage. At its current size (one-fifth to one-tenth of peers in similar segments), a huge opportunity beckons in its target product segments and with a healthy capital position we believe Poonawalla Fincorp has a strong and long runway for growth ahead," the brokerage said while suggesting a target of Rs 350 on the stock.

Following the quarterly results, the stock rose rose 5.70 per cent to hit a high of Rs 306.90 on BSE.

Poonawalla Fincorp's gross non-performing assets (NPAs) fell to 1.69 per cent, down by 236 basis points YoY. The net NPAs stood at 0.89 per cent, down 108 bps.

Emkay Global has upped its target on the stock to Rs 300 from Rs 270 earlier. Poonawalla Fincorp's profit growth was driven by margin expansion as it continues to pass on rate hikes to its customers and introduce high-yield products to expand its digital offerings, Emkay said.

"During the quarter, Poonawalla Fincorp launched new products covering consumption finance, transaction credit, and consumer finance. In a seasonally strong quarter, Poonawalla Fincorp posted the highest-ever customer acquisition and disbursements, entirely via the organic route. Direct digital partnership (DDP) contribution to disbursements increased to 66 per cent. As a result, AUM grew by 27.6 per cent YoY. Operating expenses declined, as the firm continued to rationalize its branch network and personnel resource pool. Asset-quality pressures eased, with continued provision reversal resulting in quarterly RoA of 4 per cent and RoE of 9.8 per cent," it said.
 

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