Power Finance Corporation Ltd Upgraded to Hold by MarketsMOJO on Improved Technicals and Valuation

Quality Assessment: Stable Fundamentals Amid Flat Quarterly Performance

Power Finance Corporation, a leading player in the finance and non-banking financial company (NBFC) sector, maintains a solid quality profile despite reporting flat financial results in Q3 FY25-26. The company’s return on equity (ROE) stands at a robust 19.49%, signalling efficient utilisation of shareholder capital. Its return on capital employed (ROCE) is also respectable at 9.77%, underscoring operational effectiveness.

Institutional investors hold a significant 33.81% stake in PFC, indicating strong confidence from sophisticated market participants who typically conduct rigorous fundamental analysis. This institutional backing provides a degree of stability and suggests that the company’s core business remains sound despite recent earnings stagnation.

While the quarterly results were flat, the company’s long-term performance remains impressive. Over the past decade, PFC has delivered a staggering 615.01% return, vastly outperforming the Sensex’s 259.08% gain over the same period. This track record reinforces the company’s quality credentials and its ability to generate shareholder value over time.

Valuation: From Expensive to Fair – A More Attractive Entry Point

The valuation grade for Power Finance Corporation has been upgraded from expensive to fair, reflecting a more balanced price-to-earnings (PE) ratio and other valuation multiples relative to its peers. The company currently trades at a PE ratio of 5.38, which is significantly lower than many of its finance sector counterparts such as Bajaj Finance (PE 34.58) and Bajaj Finserv (PE 32.9).

Other valuation metrics reinforce this fair assessment. The price-to-book value stands at 1.07, indicating the stock is trading close to its book value, which is attractive for a finance company with stable asset quality. The enterprise value to EBIT and EBITDA ratios are both at 10.16, suggesting reasonable operational earnings multiples. Additionally, the PEG ratio of 0.41 points to undervaluation relative to earnings growth, as the company’s profits have risen by 13.2% over the past year.

Dividend yield is another positive factor, with PFC offering a healthy 3.47%, providing income-oriented investors with an appealing yield in a low-interest-rate environment. This combination of fair valuation and attractive dividend yield supports the upgrade to a Hold rating.

Financial Trend: Mixed Signals but Long-Term Growth Remains Strong

While the recent quarter showed flat financial performance, the broader financial trend for Power Finance Corporation remains positive. The company’s year-to-date return of 15.84% outpaces the Sensex’s negative 2.28% return, highlighting relative strength in the current market environment.

Over one year, the stock has delivered a 10.91% return compared to the Sensex’s 9.66%, and over three and five years, the returns have been 242.40% and 284.91% respectively, vastly outperforming the benchmark indices. This long-term outperformance reflects the company’s ability to sustain growth and generate shareholder value despite short-term earnings volatility.

However, investors should note the flat quarterly results as a cautionary signal. The company’s financial momentum appears to be stabilising rather than accelerating, which justifies a Hold rating rather than a more bullish Buy or Strong Buy.

Technicals: Shift from Mildly Bearish to Sideways Trend Spurs Upgrade

The most significant driver behind the rating upgrade is the improvement in technical indicators. The technical grade has shifted from mildly bearish to sideways, signalling a stabilisation in price momentum and reduced downside risk.

Key technical metrics present a nuanced picture. The weekly MACD is mildly bullish, while the monthly MACD remains mildly bearish, indicating short-term positive momentum but some caution over the longer term. The weekly Bollinger Bands are bullish, suggesting upward price pressure, whereas the monthly bands are mildly bearish, reflecting some resistance at higher levels.

Moving averages on the daily chart remain mildly bearish, but the weekly KST (Know Sure Thing) indicator is mildly bullish, and the Dow Theory signals are mildly bullish on both weekly and monthly timeframes. The On-Balance Volume (OBV) indicator shows no clear trend weekly but is bullish monthly, implying accumulation by investors over the longer term.

Price action supports this technical improvement. The stock closed at ₹411.70 on 17 February 2026, up 2.72% from the previous close of ₹400.80, and is trading closer to its 52-week high of ₹443.95 than its low of ₹330.05. This price resilience amid mixed technical signals justifies the upgrade to Hold, reflecting a more balanced risk-reward profile.

Comparative Industry Context and Outlook

Within the finance and NBFC sector, Power Finance Corporation’s valuation and technical improvements stand out. Compared to peers such as Bajaj Finance and Bajaj Finserv, which remain very expensive with PE ratios above 30, PFC’s fair valuation offers a more conservative entry point for investors seeking exposure to the sector without excessive premium risk.

Moreover, the company’s dividend yield of 3.47% is attractive relative to peers, many of which offer lower yields due to higher valuations. This income component may appeal to investors prioritising steady cash flow alongside capital appreciation.

However, investors should remain mindful of the flat quarterly earnings and the mildly bearish signals on some monthly technical indicators. These factors suggest that while the stock is stabilising, it may not yet be poised for a strong upward breakout.

Conclusion: Hold Rating Reflects Balanced Risk-Reward Profile

The upgrade of Power Finance Corporation Ltd’s investment rating from Sell to Hold is driven primarily by improved technical trends and a more attractive valuation profile. The company’s quality fundamentals remain stable, supported by strong ROE and institutional ownership, while its long-term financial performance continues to outpace the broader market.

Investors should view the Hold rating as a signal of cautious optimism. The stock offers a fair valuation and decent dividend yield, with technical indicators suggesting a sideways trend rather than a clear bullish or bearish momentum. This makes PFC a suitable option for investors seeking exposure to the finance sector with moderate risk tolerance.

Going forward, monitoring quarterly earnings for signs of renewed growth and watching technical indicators for confirmation of an upward trend will be key to reassessing the stock’s potential for a further upgrade.

Upgrade at special rates, valid only for the next few days. Claim Your Special Rate →