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Thursday, January 23, 2014

PTC India Financial Services (PFS):-The next big multibagger with incredible potential

Quote:Another recent paid call which is up 30% but got a very long way to go.Readers enjoy the multibagger idea.


Multibagger Stock Idea:-

Scripscan:PTC India Financial Services (PFS)
Traded in:Nse-bse
Cmp:11
Target:44
Percentage return:400%
Duration:3 years

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.


btw:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id arunsharemarket@gmail.com to know more about it. 

53 comments:

Anonymous said...

Thanks arun....looks good for.long term...i already hold 5000 of this ...will add more on ur reco

achin jain said...

Cmp is 14 and not 11.

It was 11 in year 2013.

Anonymous said...

Dear Sir,

Can i still buy JHS Svendgaard lab at cmp 6.21. when do think it will reach 8. Also whats your opinion on Firstsource and Educomp solutions ,will they turn out to be multibagger in 1-2 years.

Please reply.u doing an amazing work. Keep up the good work.

Regards
Preeti

Arun Mukherjee said...

Dear achin,check the 1st line of the note and you will have your answer.

Arun Mukherjee said...

Thanx anonymous,but do come with your real name.Leme know too who are following the blog.

Arun Mukherjee said...

No idea when it will reach 8.I dont track firstsource or educomp that closely.

Anonymous said...

Hey Arun,

What's your opinion on Nahar Spinning? Things looking good again in yarn and textiles? Also, the valuation looks cheap. Any suggestions?

Thanks.

Anonymous said...

Sir . What is your view upon Venus power and ksk energy can i buy any one them thanks

Arun Mukherjee said...

No idea on venus power,ksk looks undervalued.

Arun Mukherjee said...

Never quite understood the textile sector barring a few.My bets would be on orbit exports,TT and Apm.TT and APM acheived my targets though.

Anonymous said...

Dear arun sir pfs will never get good valuation and growth in Profit since it is financing loss making solar and wind energy projects which will result in massive npa figures in future kindly comment

Anonymous said...

Good observation

Anonymous said...

Arun sir waiting for ur comments on pfs future NPA

Arun Mukherjee said...

Its a zero NPA company and as per their thoughts,it will always have a near zero NPA,if not zero in coming years.The team is pretty meticulous in funding(past rack record speaks about it)

Anonymous said...

Sir what is your view upon adaniports and dishtv

Arun Mukherjee said...

Very bullish on both of them.

Vijay said...

Arun - your view on Gayathri Projects @cmp?

Arun Mukherjee said...

Till interest rates see much softening,infra wont get fancied much.Bottom fishing can be done though.

Anonymous said...

What about the risks???
I would prefer if you also pen down the risks and not only the good points..
Could yo pen down the probable risks for this counter please?
Also which are the companies in which PFS has made investments through equity investments?
What valuations do companies like in which PFS has invested command?
What do you think would be the outlook for the projects that PFS has invested into (I am taking about its investments through equity or related instruments?
How have been the exit opportunities like in the sector or companies similar to the ones PFS has invested into?

Regards,
HR.

Arun Mukherjee said...

Hr,

You cant look into the projects they have invested(Or rather I lack the caliber to look at them since thats not in public domain or the managements arent ready to speak about them as they invest in startups).To have the feel,you need to look in the IPO prospectus.The management is very competent and whatever they have invested the same has been done after meticulous due diligence.A few of announcements of the company will help you to understand the amount of returns they are making.

Arun Mukherjee said...

Amazing recent quarter numbers:-

During the quarter ended 31 December 2013, PTC India Financial Services (PFS) sold its equity stake in Meenakshi Energy, resulting in a profit of Rs 82.16 crore on sales thereof. Other operating income included fee based income, income from sale of power, income earned on investments in mutual funds and non-trade investments and interest income on fixed deposits.

PFS' interest income jumped 64% to Rs 112.63 crore in Q3 December 2013 over Q3 December 2012. Net interest income (NII) grew 33.66% to Rs 55.31 crore in Q3 December 2013 over Q3 December 2012. Net interest margin (NIM) stood at 6.78% in Q3 December 2013 from 8.33% in Q3 December 2012. Cost of funds remained competitive, at 9.08% in Q3 December 2013 from 8,30% in Q3 December 2012.

As on 31 December 2013, PFS reported nil net non-performing assets (NPAs). Total outstanding loan assets rose 67% to Rs 3354 crore (as on 31 December 2013) from Rs 2010 crore (as on 31 December 2012). Total debt sanctioned was reported at Rs 10462 crore (as on 31 December 2013).

Commenting on the performance, Mr. R M Malla - Managing Director & CEO said: "I am pleased with the robust set of numbers posted by PFS in Q3 FY14. Our interest income showed a growth of 64% on account of increasing loan book to Rs 3354 crores as at 31 December 2013. I am happy to share that during Q3 FY14, PFS earned a profit of Rs 82.17 crore by divesting its stake in Meenakshi Energy. There is a vast opportunity waiting to be tapped and a nimble & financially astute model such as ours is well placed to drive performance going forward. The exit from Meenakshi Energy during the quarter strengthens our growth profile and further augments to healthy balance sheet. PFS maintains a strong focus on growing its loan book and continues to strengthen its portfolio in infrastructure projects across the energy value chain to sustain the growth momentum."

Anonymous said...

Sir, what is your view on Marksan Pharma? Pls help...or any other mid cap pharma which you would suggest.

Anonymous said...

What's your view on intense tech and neo corp?

Vijay said...

Arun, trapped in dena bank @65. Any respite or when can I expect this level.

Arun Mukherjee said...

Marksan was a huge miss at 1re..cant think of buying at present rate though prospect looks good.

Arun Mukherjee said...

I dont have idea about intense or neo corp

Arun Mukherjee said...

Dena should do well going forward.

Arun Mukherjee said...

Natco pharma,jenburkt,bafna looks good in the pharma arena

Anonymous said...

Hello sir,

Do u think morepan labs is good to invest in @cmp.

Whats your view on parabolic drugs.

thanks in advance
Regards
Preeti

Anonymous said...

What is your upon balaji amines after its q3 result as i hold this stock from at rs 50

Anonymous said...

Thank you sir for your reply on Marksan...yes sir,will look into the pharma stocks mentioned by you.

Arun Mukherjee said...

Morepen is a takeover candidate.I dont track parabolic drugs

Arun Mukherjee said...

I have quite a history with balaji amines.Prospect remains bright.Hold it

Anonymous said...

Sir . Thanks a lot for your quick reply . Sir what is your view upon ador welding strong q 3 result can i buy at cmp

Vijay said...

Why sudden collapse of Jai Balaji today.

Anonymous said...

Hey Arun,

Between Liberty Shoes and Superhouse, whose prospects look better? In my opinion, Superhouse looks a bit ignored. Its product portfolio is much more diverse, good results over the years and good dividend paying history. What are your thoughts?

Thanks.

Arun Mukherjee said...

I have been a huge relaxo fan and have seen the counter giving 5 times in less than 2 years
http://www.arunthestocksguru.com/2012/07/relaxo-footwears-ltd-paid-call-to.html

After relaxo,I like the guidance of liberty.Dolly khanna(the new lady with midas touch has hiked her stake in it)seems very bullish on it too.Superhouse too warrants decent attention.Maybe one can buy a basket by having both.

Anonymous said...

I agree that the results have been good.

But with all due respect, the sales projections made by you lack foresight and are at a very high level.

Also, I can assure you the investments made by the company is in Public Domain. And it in any case would sure be there in the annual reports as it is a regulatory requirment for them to disclose it.

My point is that you should analyse those investments and the sector that they have been made into as well and also analyse risk factors thoroughly before making a recomendation.

Otherwise, the your analysis would not be comprehensive and without risk factors there would be an obvious emotional bias towards the stock from your side.

The purpose of my comments is to have a constructive discussion and not to demean your hardwork and efforts.

HR.

Anonymous said...

The example of my comment above would be your analysis on Caplin Point Labs.

I don't think it talks about the dubious past of the promoters. The promoters of Caplin had Interpol warrants issued against them and had fled to some African country to avoid arrests. This was issued due to fradulent activities.

Such points should be mentioned in your analysis as there are lot of people who blindly follow you. That's why i have been emphasizing that negatives and risk factors of a stock should always be covered.

Regards,
HR.

Arun Mukherjee said...

Dear HR,

I truly appreciate your comments but my reading suggests that was something which happened in the year 2003-04.I mean talking about listed promoters there's very few which are truly ethical.Say even Mangalam Birla has got a FIR in his name.Bill gates went to jail.There's a nomenclature of such names.Indeed its a matter to be handled with care but again I feel chances should be given to prove themselves.Let see how the story pans out.Been so good so far.

Arun Mukherjee said...

HR,

Am still ignorant about its investments.Would be glad if you can dig it out for us.

Anonymous said...

Appreciate you allowing critical comments on your blog as well. I know of some other bloggers who don't allow for such comments.

Keep up the good work. But as I suggested, keep a section for Risk Factors in your analysis as well :-)

Will put down the names of PFS investments as well.

Kind Regards,
HR.

Anonymous said...

What are your views on Can Fin Homes?

Couldn't find it in your blog.

I have been invested from 118 levels.

If you have a view then please share. If not covered it yet, then cover it and share your analysis please.

Kind Regards,
HR.

Arun Mukherjee said...

Canfin is a very well managed company which I like a lot.Ya a coverage is coming soon on it.

Anonymous said...

whats ur view on LIC housing finance for next 7 -10 years

Arun Mukherjee said...

Lic a very safe 12-18% compounder.An awesome company to invest in.

Anonymous said...

Where is Rajat Ghosh, any idea? And Mr Sudhir Babu??

Anonymous said...

What about the latest results? How did you find it?

atharva Bhide said...

HI ARUN,
PLEASE SHARE SOME INFORMATION ON "JINDAL POLY INVESTMENT &FINANCE LTD."(demerged from jindal poly)
AND THEIR INVESTMENT IN JINDAL INDIA POWERTECH LTD.

Swapna Bhide said...

HI ARUN,
PLEASE SHARE SOME INFORMATION ON "KALYANI INVESTMENT LTD."
AND THEIR INVESTMENT IN BHARAT FORGE,BF UTILITIES AND HIKAL
WORTH 5700 RS. PER SHARE.

Arun Mukherjee said...

All this investment holding companies trades at a 60-80% discount to their NAV.Their valuation rises when a raging market starts.

Anonymous said...

PTC India Finance is already a Multibagger. Its CMP is 46. I expect it to be somewhere around 300-500 in next 5 yrs. If you want to be superrich invest in PTC India Finannce........

Rohit Chandra said...

Sir, PTC Ind Financials is still a buy at current levels to hold for 3-4 years?

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