9 August 2020
1QFY21 Results Update | Sector: Financials
Aditya Birla Capital
Estimate change
TP change
Rating change
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CMP: INR59
TP: INR86 (+46%)
Focus on retailization; Asset quality stable
Buy
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
ABCAP IN
2,414
142.7 / 1.9
115 / 37
-15/-30/-34
241
Aditya Birla Capital (ABCAP) reported 26% YoY decline in PAT to INR2.0b,
largely driven by ~50% decline in PBT to INR2.2b for the lending businesses.
In the NBFC segment, the quarter was characterized by the continued run-
down of loans (especially wholesale lending) and INR500m COVID-19-
related provisions. In the AMC segment, PAT was largely stable sequentially
despite 14% QoQ decline in AAUM. The Life Insurance segment reported
5% YoY growth in individual first-year premium (FYP), compared with 23%
YoY decline for the industry.
We expect the company to focus on strengthening the balance sheet,
liquidity, and cost cutting. While profits in the Lending segment would
remain muted in FY21, they would be compensated by better performance
in other segments. Maintain Buy, with TP of INR86 (FY22E SOTP-based).
Similar to the trend in the past three quarters, the loan book declined 2%
QoQ to INR459b, driven by corporate loans. Over the past year, the
corporate loan book has run down by 12%, driven by the halving of the
structured finance book. The only product where the corporate loan book
has been stable YoY is project loans.
28% of the NBFC loan book is under moratorium, down from 33% in April.
Only 15% of the moratorium book was 30dpd+ in the three months prior to
the lockdown. In addition to the INR900m COVID-19 provisions taken in
4QFY20, ABCAP took additional INR500m provisions in 1QFY21. While
management believes the provision buffer is adequate, we expect further
strengthening of the buffer in the ensuing quarters.
In the Housing Finance business, 28% of the retail book is under
moratorium; this is in line with some peers such as PNBHF.
Among other key details: (a) NBFC margins moderated 10bp QoQ due to
lower yield and the impact of negative carry, (b) the GNPL ratio was stable
at 3.6%, with PCR improving 500bp QoQ to 39%, (c) management expects
50% of GNPL to be recovered/resolved in FY21, (d) the share of retail loans
has increased to 19% YoY from 15%, (e) the HFC loan book has been largely
flat over the past few quarters at ~INR120b, and (f) NBFC disbursements in
July 2020 were close to monthly run-rate levels.
QAAUM declined 14% QoQ to INR2.26t, with the share of equity declining
~100bp QoQ to 32%. The share of SIP AUM in total equities improved
250bp to 41%, thus improving the stickiness of the portfolio.
ABCAP’s SIP
market share stands at 10.3%.
While revenues were under pressure, they were largely offset by lower
opex. Hence, PAT was largely stable QoQ at INR970m.
In fact, the PBT
margin actually improved 2bp QoQ to 24bp despite the lower share of
equity AUM – 4QFY20 saw MTM impact of INR200m in other income.
Lending business – 28% of loans under moratorium
Financials & Valuations (INR b)
Y/E March
2020 2021E 2022E
PBT Break-up
NBFC
10.7
8.2 10.2
Housing
1.4
1.5
1.8
AMC
6.6
5.8
6.6
Life Insurance
1.4
1.4
1.5
Consol PBT
16.9 16.2 19.8
Consol PAT Post MI
9.2
9.1 11.2
Growth (%)
5.8
-0.7 22.5
RoE (%)
8.3
7.0
7.9
Shareholding pattern (%)
As On
Jun-20 Mar-20 Jun-19
Promoter
70.5
70.5
72.7
DII
12.6
12.6
8.3
FII
2.2
2.2
2.9
Others
14.8
14.8
16.1
FII Includes depository receipts
AMC segment – PBT margin expands despite lower equity share
Motilal
January
research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
14
Oswal
2020
1
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com) |
Piran Engineer
(Piran.Engineer@MotilalOswal.com)
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com) |
Divya Maheshwari
(Divya.Maheshwari@motilaloswal.com)