11 February 2021
3QFY21 Results Update | Sector: Financials
MAS Financial Services
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)
MASFIN IN
55
46.9 / 0.7
1269 / 448
-10/-2/-51
28
CMP: INR858
TP: INR1,020 (+19%)
Buy
Muted 3QFY21, focus remains on asset quality
MASFIN’s 3QFY21 PAT declined 25% YoY to INR362m (9% miss). The
miss was due to lower topline on account of sequential run-down in
AUM. In 9MFY21, it delivered 15%/9%/17% decline in total
income/PPOP/PAT.
While disbursements improved QoQ, they were still ~80% of YoY levels
(in line with the management’s guidance). As a result, consolidated
AUM declined 4% QoQ/ 15% YoY to INR53b. The loan mix remained
largely stable with the share of MSME/SME loans at 60%/31%.
The share of off Balance Sheet loans declined sharply to 33% from 42%
QoQ. However, the company has DA sanctions worth INR10b.
Yield on loans (calc.) declined ~200bp QoQ to 13.4%. While this was
offset by an 80bp decline in the CoF, overall spreads fell 130bp to 5.2%.
MASFIN reduced BS liquidity from INR16b to INR10b sequentially. Yet,
this is quite healthy at 30% of loans.
The expense ratio improved from 1.6% to 1.3% YoY.
From 92% in Sep’20, collection efficiency improved to 96% in 3QFY21.
GS3 ratio (pro forma) was largely stable at 1.7%.
MASFIN incurred ~INR40m of COVID-19 provisions during 3QFY21,
taking the total provisions to INR560m (1.7% of loans).
Over 0dpd loans increased marginally to 6.2% from 5.9%.
The management expects INR8-10b of disbursements in 4QFY21. It is
confident of achieving 20-25% AUM growth once normalcy sets in.
Restructuring to be ~1% of the loan book
The average ticket size of SME loans more than doubled QoQ to
INR5.6m.
HFC subsidiary
– AUM has been flat for the past eight quarters at
INR2.7b; GS3 ratio (pro forma) stood at 36bp.
Tier I ratio stands at 30%. RoA/RoE for 3QFY21 was 3.1%/13%.
AUM runs down; on-book spreads contract
Financials & Valuations (INR b)
Y/E March
2020
2021E
Total income
4.3
3.4
PPP
3.3
2.8
PAT
1.8
1.4
EPS (INR)
33.2
26.4
EPS Gr. (%)
19.2
-20.3
BVPS (INR)
182
201
Ratios (%)
NIM
9.2
6.7
C/I ratio
23.2
17.4
RoA on AUM
3.1
2.6
RoE
19.8
13.8
Payout
24.1
26.0
Valuations
P/E (x)
25.9
32.5
P/BV (x)
4.7
4.3
Div. yield (%)
0.9
0.8
Shareholding pattern (%)
As On
Dec-20 Sep-20
Promoter
73.6
73.6
DII
11.0
11.2
FII
1.5
1.3
Others
13.9
14.0
FII Includes depository receipts
2022E
3.8
3.0
1.8
32.4
22.5
226
7.6
20.8
3.4
15.2
24.4
26.5
3.8
0.9
Collection efficiency close to pre-COVID levels; GNPL ratio stable
Key highlights from the management commentary
Dec-19
73.5
10.9
1.6
14.0
Other highlights
Valuation and view
The company operates in a tough environment, with a large exposure to
the MFI/MSME sector. The MFI sector is among the worst hit by the recent
pandemic, with collection efficiency far below pre-COVID levels. The
management is focusing only on collections and recalibration of
underwriting processes in FY21, while growth has taken a backseat. We
expect 20% AUM decline in FY21, followed by 15% CAGR over FY21-23E.
Collection efficiency at 96% is encouraging. Total provisions of INR1b (~3%
of loans) on the Balance Sheet are largely adequate. We cut our EPS
estimate by ~7% to factor in lower AUM growth, partially offset by lower
credit costs on account of healthy collection efficiency. The company is
likely to deliver 4-4.5% RoA/15-16% RoE over the medium term. Maintain
Buy with a TP of INR1,020/share (4x 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.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
14 January 2020
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