Power Finance Corporation and Jindal Steel and Power: Weekly Recommendations

The two stocks recommended by SMC Global Securities’ Research Team this week are Power Finance Corporation (PFC) and Jindal Steel and Power. These two stocks have shown great potential with positive financial estimates for the next two financial years. So, let’s go through the details of the two stock recommendations for the period between March 24, 2025 and March 28, 2025.

Power Finance Corporation Limited

Power Finance Corporation share price is ₹407.55 (as on March 21, 2025) and its target price is set at ₹482 with an upside potential of 18%.

Power Finance Corporation Limited: Investment Rationale

• Power Finance Corporation Limited is a significant market player in the power financing sector. As on December 31, 2024, the share of loans to discoms continues to make a majority share in the overall loan book with 41%, followed by loans to generation companies (gencos) with 34%, loans to renewable energy (RE) companies with 14%, loans to transmission companies (transcos) with 7% and loans to infrastructure companies and others make 4% each.
• Loan assets of the company increased 10% YoY to ₹5,03,824 crores at end December 2024. Within the loan book, the generation loan book moved up 4% to ₹2,39,567 crores, while the transmission loan book expanded 12% to ₹36,630 crores and distribution jumped 12% to ₹2,04,665 crores.
• The private sector loan book galloped 27% to ₹1,05,927 crores, while the government sector loan book rose 6% to ₹3,97,897 crores.
• Disbursement of the company jumped 45% YoY to ₹34,151 crores in Q3 FY2025, as the generation disbursement moved up 56% to ₹9,457 crores, while transmission disbursements also surged 150% to ₹2,371 crores.
• Further, the distribution disbursements jumped 46% to ₹20,367 crores in Q3 FY2025. The private sector disbursements zoomed 97% to ₹9,385 croгes, while the government sector disbursements increased 32% to ₹24,766 crores in Q3 FY2025.

• The company reported improved asset quality in Q3 FY2025. The gross NPA declined to 2.68% end December 2024 from 2.71% a quarter ago. Net NPA also declined to 0.71% end December 2024 from 0.72% a quarter ago.
• It continues to maintain 73% provisioning on its NPA portfolio. Capital Adequacy Ratio stood at 24.15% at end December 2024 compared to 26.86% a year earlier.
• Net Interest Margin (NIM) improved to 3.65% in Q3 FY2025 from 3.57% in the preceding quarter. The interest spreads of the company were steady at 2.60% in Q3 FY2025 from 2.61% in the preceding quarter and improved from 2.55% in the corresponding quarter last year.

Power Finance Corporation Limited: Shareholding Pattern

The promoters’ shareholding is highest in Power Finance Corporation at 55.99%.

Power Finance Corporation Limited: Valuation

The company is experiencing robust loan growth, driven by significant expansion in its private sector loan portfolio. At the same time, enhancements in asset quality and an improved NIM bode well for its future performance.

Its renewable energy portfolio continues to grow steadily, maintaining its position as the largest renewable book in the country. To further strengthen this segment, the company recently secured the largest green loan agreements to date, finalized with the Japan Bank for International Cooperation (JBIC) for JPY 120 billion.

Thus, it is expected that the stock may see a price target of ₹482 in 8 to 10 months’ time frame on two year average P/BV of 1.55x and FY26 (E) BVPS of ₹311.09.

Power Finance Corporation Limited: Risk

• Credit Risk
• Liquidity Risk

Jindal Steel and Power Limited

Jindal Steel and Power share price is ₹918 (as on March 21, 2025) and its target price is set at ₹1,072 with an upside potential of 17%.

Jindal Steel and Power Limited: Investment Rationale

• The company is advancing its development efforts with the launch of new projects, including a color-coated line and a galvanizing line, each adding 2,00,000 tonnes of capacity.
• Additionally, a Quenching & Tempering (Q&T) facility is being introduced to enhance the value of the plate portfolio, with a planned capacity increase of 2,50,000 tonnes. Furthermore, integrated supply chain projects are being implemented to improve logistics and operational efficiency.
• In September 2024, the company signed a Moll with Jindal. Renewable Power Pvt Ltd (JRPL) to invest in green hydrogen production for steelmaking in Angul with a capacity of 4,500 TPA, to commence by December 2025.
• In addition, the project will also entail a supply of 36,000 tons of oxygen per annum that will be used in the Angul steelworks. JRPL will also be supplying nearly 3GW of renewable energy to the company’s facilities reducing the steelmaker’s dependence on coal-fired energy by 50% in the next 2-3 years.

• As of December 31, 2024, JSP’s net debt stood at ₹13,551 crores, compared to ₹12,464 crores on September 30, 2024. The net debt to EBITDA ratio increased to 1.40x as of December 31, 2024, up from 1.21x on September 30, 2024.
• The company’s expansion projects are progressing on schedule, supported by strong financial performance. The total capital expenditure for the quarter amounted to ₹2,857 crores, primarily driven by expansion activities at Angul. The company’s management is focused on maintaining net debt to EBITDA ratio below 1.5x.
• Under the current expansion program, the cumulative capital expenditure (capex) has reached ₹23,612 crores. The upcoming capex plans focus on investments in cost efficiency, sustainability, and increasing the share of value-added products. Additionally, the company plans to invest ₹15,000 crores over the next three years to further enhance its capabilities.
• In Q3 FY25, the company’s steel production for the quarter was 1.99 million tonnes (MT), reflecting a 3% YoY increase, while steel sales reached 1.90 MT, up 5% YoY. Exports accounted for 7% of quarterly sales.
• India’s total steel production for the quarter was 38.4 MT, showing a 6% QoQ growth, while apparent steel consumption rose by 4% sequentially. Exports surged by 44% to 1.8 MT, while imports decreased by 13% to 2.8 MT, positioning India as a net importer of steel.

Jindal Steel and Power Limited: Shareholding Pattern

In the overall shareholding of Jindal Steel and Power, promoters have the highest shareholding at 61.19%.

Jindal Steel and Power Limited: Valuation

The company has a strong track record, and according to its management, the demand for steel in India remains robust, supporting the prices of value-added products.

The company is concentrating on value-added products to enhance overall realization and margins. It aims to reduce leverage by funding part of its capex through internal accruals and maintaining an optimal net debt-to-EBITDA ratio of below 1.50 times.

Thus, it is expected that the stock will see a price target of ₹1,072 in 8 to 10 months’ time frame on current P/BV of 1.98x and FY26 (E) BVPS of ₹541.50.

Jindal Steel and Power Limited: Risk

• Sizeable capex and associated risks
• Volatility in raw material prices

Conclusion

These two stocks, one being an NBFC and the other being a steel company can reach their target price in the coming 8 to 10 months. However, it is always better if you do your analysis before investing and set a stop-loss target. To keep track of your invested stocks, open a demat account with SMC Global Securities and invest on the go.

Reference:
https://www.smctradeonline.com/research/wise-money/241

Author: All Content is verified by SMC Global Securities.