Whalesbook
Profit Growth Despite Revenue Slip
Power Finance Corporation (PFC) shares traded higher on Wednesday, May 13, after releasing its fourth-quarter and full-year fiscal 2026 results. The state-owned non-banking financial company (NBFC) reported a net profit of ₹6,999 crore for Q4 FY26, a 10.8% increase from ₹6,316.5 crore a year ago. This profit surge was mainly due to its EBITDA margin widening to 98.6%, up nearly six percentage points from 92.7% year-on-year. This happened despite revenue from operations slipping 1.2% to ₹28,919 crore from ₹29,265 crore year-on-year. The company's market capitalization was ₹1,47,663.05 crore on the BSE.
Dividend Payout Sparks Share Gains
Adding to positive sentiment, PFC's board recommended a final dividend of ₹3.95 per share for FY26, pending shareholder approval. This payout, combined with interim dividends of ₹14.60 per share, brings the total dividend for FY26 to approximately ₹18.55 per share. This aims to boost investor returns. Following the results, PFC shares saw an intraday surge of 3.01% to ₹454 before trading around ₹447.65 by midday, still up 1.58% from the previous close.
PFC Valuation vs. Peers
PFC's valuation, with a P/E ratio between 4.36 and 8.08, appears attractive within the financial services sector. Peer REC Limited trades at a P/E of about 5.56-5.81 and offers a dividend yield of around 5.3-5.6%. IREDA trades at a higher P/E of roughly 19.7 with a lower dividend yield of about 0.44%. The broader Indian NBFC sector is expected to grow 12-18% in FY26, driven by demand in MSME lending, retail credit, and gold loans, helped by falling borrowing costs. PFC focuses on power sector infrastructure finance, a specialized niche. PFC shares are up 24% year-to-date as of May 11, 2026, supported by its current performance and a dividend yield of about 3.31%.
Concerns Over Long-Term Growth and Margin Sustainability
While PFC's Q4 results look positive, some long-term concerns exist. The revenue decline, though slight, raises questions about the sustainability of its core business growth. The high 98.6% EBITDA margin, while showing efficiency, may also face scrutiny for its long-term sustainability. MarketsMOJO recently downgraded PFC to a 'Hold' rating, citing weak long-term fundamentals despite strong quarterly results. This contrasts with a broader analyst consensus that rates PFC a 'Strong Buy' with a 12-month price target around ₹491.15. Concerns over slow long-term growth (9.62% net sales CAGR) highlight the need for investors to weigh short-term dividends against PFC's long-term expansion versus peers like REC, which has a comparable dividend yield and a more diversified loan book.
Analyst Targets and Future Outlook
PFC's role in financing critical power sector infrastructure remains a key strength. Analysts have an average price target of ₹491.15 for PFC, suggesting over 11% upside from current levels. PFC's ability to meet rising capital needs in the power sector while maintaining profitability and shareholder returns will be watched closely. Investors will seek guidance on the revenue trend and margin sustainability, especially given the 'Hold' rating from some analysts focused on long-term fundamentals.