Positive triggers for PFS
1.PFS gets around 50% of its funds from banks ..borrowing at prevailing mclr rates. Due to demonetoization, the mclr has fallen by 60-70 bps and thus consequently the cost of funds of PFS has fallen quite drastically. As the mngt says PFS has been a beneficiary of the demonetization process and the positive effect will be seen moderately in Q4 and fully in Q1 fy 2018.
- Due to huge execution of renewables in Q4, the topline of PFS which consists of 50% renewables will see a good jump. As it is Q4 is a good quarter for PFS but with the March deadline set for many renewable projects, the topline growth on YnY basis will be significant.
3) Renewables now account for around 50% of the topline. Since PFS has stopped loans for new thermal power projects, the renewables percentage will rise to around 60-65% byQ2 fy2018. Lending to renewables has the added attraction that on completed projects they CAR required is just 50%. Thus they get to earn twice the amount of earnings in lesser time from the same capital..than they would by lending to non renewables sector.
4) in the next few quarters, the following problem projects whereby PFS had made around 50% provisioning will be resolved and the profitability of PFS will be strengthened to that extent.
a) Surana Power...under talks for sale to the adjoining thermal power plant owner _KSCL ...to be completed by end of Q2
b) Konasema....Gail has agreed to provide gas from ONGC and the taking over is under process
c) ikon...PFS had an exclusive charge on land...and SBICAPS has been appointed to find a buyer...land valued at 35 crores...full amunt due is expected to be recovered by PFS
d) Shalivahana...the power plant is up and running and the monthly billing is getting settled. The outstanding amounts will be cleared by Q1
e)Kohinoor....takeover talks with new investor in advanced stage...maybe 1 -2 quarters the sale will be completed
f) Rajpur...permission to take over the project already obtained from himachal Govt and now SBICAPS is in the process of finding a new buyer...
g) Wind project in Maharashtra...project is running and supplying to the grid...only PPA was not signed...now the Govt of Maharashtra has decided to sign PPAs and only a few procedural undertakings have to be signed by the promoter...almost as good as completed.
I think these multiple triggers is causing the stock to be rerated and the stock is already in uptrend....it may keep going up as the eps gets better and better...the worst may now be behind PFS...
Now we have all the main ingredients which make PFS a good investment
near term and medium term triggers
very good technicals,,,bullish on long and medium term charts
strong balance sheet ..26% capital adequay ratio
good presence in a niche area (renewables)