A Power Stock Charging Investors’ Portfolio with 10% Dividend!

  • Stock Market Analysis
  • Editors Pick

The power sector is currently been seen as one of the biggest bets for the next 10 years. Energy consumption has gone through the roof this year which is only expected to increase as time passes by, especially with the progress of the landscape of electric vehicles in India. A country’s energy consumption is also an indicator of its development and with still many rural parts of the country yet to get access to electricity, companies operating in the power infrastructure development, transmission, or providing specialized finance to this space have a huge scope.  

Power Finance Corporation (NS: PWFC ) (PFC) which is an ISO 9001:2015 and ISO 45001:2018 certified government undertaking, coming under the administration of the Ministry of Power and is an NBFC that provides financial aid to the companies operating in the power sector. The company explores emerging opportunities in the field of e-mobility, energy storage, renewable energy equipment manufacturing, etc. The company enjoys the highest ratings (AAA) by domestic agencies - ICRA (NS: ICRA ), CRISIL (NS: CRSL ) and CARE (NS: CREI ) and has been given a Maharatna status by the government. 

Image Description: Comparative analysis of PFC with other specialized finance companies, having P/E ratio on the Y axis, Revenue CAGR on the X axis and dividend yield determining the size of the circle.

Image Source: Investing Pro

It is a dominant player in the specialized finance sector, having a market share of over 20%. Strong asset quality, depicted by low NPAs (non-performing assets) combined with the lowest administrative cost in the industry makes this lean and professionally managed company a no-brainer for long-term investors who are bullish on the growth of the power sector in India. 

Coming to the financials, it is a consistently profitable company and recorded a 6.47% YoY jump in net revenue to INR 76,344.92 crores in FY22 which is the highest ever the company recorded yet. From FY17, the company has never posted a dip in the net revenue and has grown the same at a yearly rate of 22.56% over the last 5 years. 

The net profit for FY22 jumped 19.3% YoY to INR 14,014.79 crores which is also the highest till now. Surprisingly, the net income has risen at a yearly rate of 44.35% in the last five years which is significantly higher than the industry’s average of 21.99%. Free cash flows which remained negative since FY18, turned positive for the first time in FY22, from a negative INR 59,235.39 crores in FY21 to INR 1,512.32 crores in FY22.

The best part is the mouth-watering valuation at which the company is available. Its shares are trading at a P/E of just 2.13, compared to the sector’s average of 21.75, while the book value is a mere 0.31. The company is also known for dividends and it's difficult to beat the consistent payouts of PFC as it never skipped on paying dividends in the last 10 years, at least. The current yield is 10.63%, which alone beats inflation.

 

Disclaimer: I hold PFC shares in my portfolio. The above article is not a recommendation to buy/hold/sell any security. 

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  • Ria Singh @Ria Singh
    thanks 👍
    Like 0
  • Jagan Mohan @Jagan Mohan
    huge fall in power grid. take more precautions
    Like 0
  • Ketki Patel @Ketki Patel
    I like all PSU stocks. n SIP in dips.
    Like 0
  • Sagar Lakkewar @Sagar Lakkewar
    which is the best price to buy PFC sir?
    Like 0
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      The best price is always revealed in hindsight :)
      Like 1
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      The 'best price' is always revealed in hindsight.
      Like 0
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