Power Finance Corporation set for 17% upside? 3 factors fuelling Motilal Oswal’s bullish call
Financials are buzzing in trade today. A look at the top movers in the list of finance sector stocks, throws up some interesting names. The share price of Power Finance Corporation is up 3% in 5 days. Motilal Oswal has a Buy rating on the stock, Power Finance Corporation, with a target price of Rs 485 a share. This implies upside of nearly 17% from current levels. The brokerage house believes that company’s revised growth outlook, evolving sector dynamics and asset quality trends support the view.
According to Motilal Oswal, they expect the profits to grow 8% on a compounded basis between FY25-FY27. They do expect “some upside risks to their estimates based on the quantum of write-backs from the resolution of stressed assets.” The brokerage house pointed out that the Buy rating on the stock is predicated primarily on undemanding valuations. It is trading at “0.9x FY27 standalone P/BV, with favourable risk-reward.” At these rates, they see “PFC significantly cheaper than its power sector peers, despite having ROE potential of 18-19% over FY26- FY27.”
Motilal Oswal on PFC: India’s evolution in power sector
Motilal Oswal highlighted that the company’s strategic focus on high-yielding loans to DISCOMs and other state-backed initiatives ensures stable profitability, even as it continues to scale up its Renewable Energy financing.
The brokerage explained that the power sector‘s investment landscape is being fundamentally reshaped by technological advancements, particularly the shift from traditional coal-based generation to renewables. From coal to solar PV, India is now achieved over 200GW of non-fossil fuel capacity, with solar PV forming the largest component.
Motilal Oswal on PFC: Battery storage systems the next big opportunity
However there are some challenges though. Motilal Oswal lists out the challenges of intermittency. Solar PV is an intermittent power source, dependent on sunlight and it can’t be controlled like conventional power plants.
This poses a challenge for maintaining base load and grid stability and it is a global issue. As a result, shift toward integrating renewables with energy storage solutions is a trend seen across the world.
“Battery storage is increasingly being preferred over pumped storage projects (PSP) due to its greater flexibility,” added Motilal Oswal. According to latest guidelines, the inclusion of around two hours of battery storage in every new renewable tender is mandated. This according to the brokerage house, signifies “a new phase for renewables where every new capacity addition is expected to incorporate storage.”
However, one needs to remember that the overall ecosystem for battery storage requires time to mature. Additionally, Motilal Oswal pointed out that a “large volumes of battery storage projects are still in the evaluation stage, which limits immediate financing opportunities.”
Motilal Oswal on PFC: Long-term power outlook intact
That said, Motilal Oswal highlighted that the broader power sector dynamics and future outlook is intact. According to them, PFC’s FY26 loan growth guidance of 10-11% “reflects a transitory phase. If battery storage matures or fresh DISCOM schemes are launched, loan growth could accelerate.” The long-term power sector outlook remains structurally robust, they added.