Multibagger Stock Idea:-
Scripscan:PTC India Financial Services (PFS)
Business:PTC India Financial Services Ltd (PFS) is promoted by PTC India Ltd (PTC) as a special purpose investment vehicle to provide total financial services to the entities in energy value chain, which inter-alia includes investing in equity and/or extending debt to power projects in generation, transmission, distribution; fuel sources, fuel related infrastructure like gas pipelines, LNG terminals, ports, equipment manufacturers and EPC contractors etc.PFS also provides non-fund based financial services adding value to green field and brown field projects at various stages of growth and development.
Note:I attended the conference call of the company held recently.The conference transcript/points itself is more than enough to suggest the counter to you folks.
1)Loan disbursement during Sep'13 quarter stood at Rs 549 crore, growth of 66% y.o.y.Management strongly believes the company is set for an exponential growth in terms of revenues and profits in next couple of years.
2)During the next couple of years, as per the management, the idea is to cash in the equity investments of about Rs 435 crore( invested in 5 projects as equity, of which 2 investments are based on buy back mode, and need not have to worry for projects to commission) that the company has made so far and also to venture in financing new infrastructure space apart from power, i.e. into roads; coal mines developments, railway works and T&D projects.
3)Management also expects that the reform initiative taken by government will accelerate further in the coming months and more clarity will emerge on coal blocks and health of discoms.
4)Yield on assets was lower to 13.57% for Sep'13 quarter as compared to 14.19% for Sep'12 quarter largely due to shift from short term disbursements to more long term disbursements.Yields from short term disbursements for loans like for bridge funding etc are better than yields on long term disbursements. Interest spreads stood at 4.88% during Sep'13 quarter and management expects the spread to remain around these levels for next few quarters.
5)Of the total loan asset of Rs 3125 crore as on Sep'13, nearly 40% constitute renewable energy and rest are thermal based assets. Renewable, especially wind generally takes about a year's time for capacity to go on stream as against thermal, which on an average takes about 3 years. Hence the share of renewable is going up, due to faster addition of capacities.
6)Renewable loan book stands at around Rs 1200 crore, of which Rs 1036 crore belongs to wind energy, Rs 221 to solar and rest are biomass energy book.
7)Company has total loan book of about Rs 2400 crore, of which Rs 900 crore are Long term loans, Rs 700 crore are short term, Rs 470 crore ECB, Rs 120 crore debentures and rest are bonds.
8)GNPA was unmoved at slightly less than Rs 5 crore. Management continues to be positive on the health of assets and does not anticipate any further increase in NPA's.Other income is higher as it constitutes fee based income from loan syndication and lead institution activities.
Quintessence:PFS reported Nil Net NPAs.Debt sanctioned at Rs 10132 crore, as on Sep'13.Total outstanding loan assets stood at Rs 3125 crore as on Sep'13.Capital Adequacy Ratio as on Sep'13 stood at 32.31%.Promoter's shareholding as on Sep'13 stood at 60% and none of the shares are pledged.
Performance for the year ended Mar'13:For the year ending Mar'13, Interest income stood at Rs 251.32 crore, up by 89% y.o.y.Interest expense stood at Rs 101.17 crore, down by 47% resulting in 133% increase in NII at Rs 150.15 crore. The other income was down by 25% to Rs 35.21 crore resulting total income of Rs 185.36 crore, up by 66%. Other income for FY'12 includes income from sale of certified emission units of Rs 4.63 crore as compared to Nil for FY'13.Operating expense was down by 19% to Rs 30.07 crore. PBT before profit on sale of equity investments was up by 109% to Rs 155.9 crore. There was a profit of Rs 127.24 crore for Mar'12 year, being profits from divesting equity stake in 2 companies namely Ind-Barath Power generation and Indian Energy exchange, as compared to Nil for Mar'13 year.PBT after profits on sale of equity investments and emission units, stood at Rs 155.29 crore, down by 23%. After providing total tax of Rs 51.13 crore, up by 7% y.o.y, the PAT stood at Rs 104.16 crore, down by 32% y.o.y.
Performance for the half year ended Sep'13:For H1 FY'14, PFS reported net sales of Rs 195.66 crore, up by 47% y.o.y. Interest expense was up by 99% to Rs 85.70 crore, as NIM was down by 192 bps to 6.93% resulting a NII of Rs 109.96 crore, up by 22% y.o.y. For H1 FY'14, the other income stood at Rs 1 lakh as compared to Rs 21 lakh for H1 FY'13, resulting total income of Rs 109.97 crore, up by 22% y.o.y.Operating expense was up by 120% to Rs 23.32 crore.Operating expense include MTM forex loss of Rs 9.34 crore as compared to forex loss of Rs 1.88 crore for H1 FY'13. Provision for H1 FY'14 stood at Rs 4.14 crore as compared to Rs 3.28 crore for H1 FY'13. Thus PBT was up by only 8% to Rs 82.51 crore. Total tax was up by 13% to Rs 28.06 crore and PAT for H1 Sep'14 stood at Rs 54.45 crore,up by 5% y.o.y.
Future numbers:As per my calculations assimilated with the management guidance,this is what the company will deliver.Present fiscal loan book should be over 4200crs.Fy15 loan book of 8000crs,fy16 will be around 12000crs.It would be prudent to note that the company needs no funds till 25000crs loan book,so no dilution or destruction of wealth in the offing.So even I consider 10000crs loan book and a 4% NIM,the pbt figure comes at 400crs for fy16.Equity investments will further chip in with 150crs of PBT.So 550crs of PBT for fy16 or say around 400crs PAT.Its presently quoting at trailing earnings of a tad low than 7 times.If the number vindicates,turn to fy16 or start counting fy17 numbers,give it a 7 trailing PE and you get the target price of 44 bucks.As its dividend policy if it pays 20% of its PAT(400crs),you get 80crs as dividend or over 1.5rs dividend per share,resulting in a forward yield of 14% at present prices.
Conclusion:Its a terrific unnoticed company backed up with a robust pedigree team,say kinda an all-rounder in its own regard.At 11 bucks you get to satiate your penny priced multibagger desires.You get the taste of private equity investment play.You get a zero NPA company which is set to deliver very high CAGR growth at least for the next 3 years.You get a high dividend play as it pays more than 20% of its PAT as dividends,last year being 40 paise per share.With higher profits in the coming years,higher will be the dividends.At 11rs there's no downsides either.Over a period of 3 years,the company is a probable multibagger.A 400% return or a 4 bagger awaits the folks who can stay put for only 3 years.
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