9 February 2021
3QFY21 Results Update | Sector: Financials
Muthoot Finance
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
MUTH IN
401
475.8 / 6.5
1405 / 478
-13/-37/31
3023
CMP: INR1,186
TP: INR1,500 (+26%)
Strong all-round performance
Buy
Muthoot Finance (MUTH)’s 3QFY21 PAT grew 22% YoY to INR9.9b, driven
by healthy loan growth, stable spreads, and continued cost control. In
9MFY21, MUTH delivered 23–24% NII/PPOP/PAT growth.
While the number of customers and loan accounts had been largely
flattish for the past several quarters, a 4–5% sequential uptick was seen in
the same. Likewise, gold tonnage and gold loans grew 2%/7% QoQ.
Total
AUM (standalone) stood at INR497b (up 32% YoY).
Notably, with 7% sequential loan growth, MUTH outperformed its next
largest peer (3% QoQ) despite more than twice the loan book size.
The company continues to diversify the borrowing mix, raising INR20b via
retail NCDs in the quarter.
Overall cost of funds (calc.) declined 60bp QoQ
to 8.5%, while spreads were sequentially stable at 14.2%.
The company continues to maintain a tight control on expenses – total opex
was down 2–3% QoQ and YoY, driven by lower employee expenses (due to
lower variable pay) and advertising costs. Its expense ratio of 3.6% is the
lowest in the past several years and ~100bp lower v/s FY20.
The company reported 67% LTV on the balance sheet; incremental LTV is
68–70%.
Incremental CoF is 8% for banks and 7.5% for NCDs. It would maintain
excess liquidity.
The GNPL ratio was stable at 1.3%. Total provisions on the BS stand at 1.8%.
The share of NCDs has increased 500bp to 30% over the past two quarters.
Liquidity on the BS remains elevated at 21% of borrowings.
Muthoot Homefin:
Total AUM declined 3% QoQ / 7% YoY to INR19b.
Disbursements are still at 10–15% of pre-COVID levels.
The GNPL ratio
increased from 1.7% to 6.8% (proforma).
Total BS provisions stand at 2.1%.
Belstar Investment and Finance:
After two subdued quarters, the company
resumed growth.
AUM grew 7% QoQ / 26% YoY to INR29b, while PAT was
muted at INR54m (v/s INR258m YoY).
The GNPL ratio was largely stable at
0.7%. Total BS provisions stand at 2.1%.
Key highlights of the quarter – volume-led loan growth; lower CoF
Financials & Valuations (INR b)
Y/E March
2020
2021E
NII
57.7
66.4
PPP
41.5
51.7
PAT
30.2
37.5
EPS (INR)
75.3
93.4
EPS Gr. (%)
52.9
24.1
BV/Sh.(INR)
289
363
Ratios
NIM (%)
14.9
14.0
C/I ratio (%)
30.0
25.2
RoA (%)
6.8
6.6
RoE (%)
29.0
28.7
Payout (%)
19.9
17.0
Valuations
P/E (x)
15.8
12.7
P/BV (x)
4.1
3.3
Div. Yld. (%)
1.3
1.3
Shareholding pattern (%)
As On
Dec-20 Sep-20
Promoter
73.4
73.4
DII
7.0
7.7
FII
15.1
13.9
Others
4.5
5.0
FII Includes depository receipts
2022E
78.9
61.8
44.9
111.9
19.8
452
14.1
24.7
6.9
27.5
17.0
10.6
2.6
1.6
Highlights from management commentary
Other highlights
Dec-19
73.4
7.8
14.5
4.2
Subsidiary performance
Valuation and view
After several quarters of stagnant customer and loan count, 4–5% sequential
growth this quarter is encouraging. As the economy recovers from the shock of
the pandemic, loan demand is likely to remain high. We expect the company to
deliver 12–15% loan growth post FY21. Incremental cost of funds is ~100bp
lower than on-book cost of funds – this should mitigate yield pressure, if any.
RoA/RoE is likely to remain robust at 7%/27% over the medium term. We
increase our EPS estimates by 6–7%, factoring in stronger growth and lower
opex. Maintain Buy, with TP of INR1,500 (2.7x FY23E BVPS).
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)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
14 January
research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
1
Motilal Oswal
2020