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MMFSL’s PAT at INR1.5bn, up 34%YoY (7% ahead of our estimates),
comes on the back of strong growth metrics (AUM up 45%YoY to
INR195bn) and controlled LLPs as asset quality continues to hold ground
(GNPA at 4.1%, NNPA at 1.1%). On the flip side, increase in cost of funds
(up ~50bps QoQ) resulted in margin moderation of ~25bps to 9.2% (calc.).
We factor in RoA of ~3.3% and RoE of ~21.5% for FY12-14E. Assigning 2.2x
FY13E adj. BV, we come to a TP of INR706 and maintain ‘HOLD’.
Growth: No signs of fatigue, CVs provide further boost
Given the festive season, Q3FY12 registered a strong disbursement growth of INR59bn,
up 39%/32% YoY/QoQ. This has led to a 45% AUM growth, within which, CVs corner
12% vis-à-vis 8% in Q3FY11. Along with CVs, all other asset classes continue to do well.
Assignment resumes: Pool now stands at 9% of AUM
Post nil assignment during H1FY12, Q3 saw INR6.5bn of loans being assigned (primarily
tractor loans). The pool now stands at INR17.7bn, 9.1% of the AUM. Consequently,
income from operations for Q3FY12 includes INR187mn of income from fresh
securitization transactions (INR107mn in Q3FY11). MMFSL changed the accounting
policy from upfront recognition of securitization income to that of amortization over
the life of the loan hence the previous quarter numbers are not comparable.
Asset quality: Remains the good run, Q4 to see recoveries
GNPA at 4.1% and NNPA at 1.1% reiterate the presence of strong cash flows in the
rural economy. Coverage ratio stands at 74.4%. As is the case, Q4 witnesses increased
recovery drives on the back of which NPAs are likely to hold the current levels.
Outlook and valuations: Play on rural spirit; maintain ‘HOLD’
We believe that structural (growing non-farm income) as well as cyclical (demand in
rural auto segment) drivers are conducive for MMFSL’s asset and earnings growth. It
also implies that GNPAs are unlikely to touch the previous highs of 8%-9%. Regulatory
overhang has eased to an extent with clarity emerging on provisions and treatment of
off-book assets. We build in an asset and PAT CAGR of 25% and 21% over FY12-14E
respectively. Maintain ‘HOLD’ with a target price of INR 706/share
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MMFSL’s PAT at INR1.5bn, up 34%YoY (7% ahead of our estimates),
comes on the back of strong growth metrics (AUM up 45%YoY to
INR195bn) and controlled LLPs as asset quality continues to hold ground
(GNPA at 4.1%, NNPA at 1.1%). On the flip side, increase in cost of funds
(up ~50bps QoQ) resulted in margin moderation of ~25bps to 9.2% (calc.).
We factor in RoA of ~3.3% and RoE of ~21.5% for FY12-14E. Assigning 2.2x
FY13E adj. BV, we come to a TP of INR706 and maintain ‘HOLD’.
Growth: No signs of fatigue, CVs provide further boost
Given the festive season, Q3FY12 registered a strong disbursement growth of INR59bn,
up 39%/32% YoY/QoQ. This has led to a 45% AUM growth, within which, CVs corner
12% vis-à-vis 8% in Q3FY11. Along with CVs, all other asset classes continue to do well.
Assignment resumes: Pool now stands at 9% of AUM
Post nil assignment during H1FY12, Q3 saw INR6.5bn of loans being assigned (primarily
tractor loans). The pool now stands at INR17.7bn, 9.1% of the AUM. Consequently,
income from operations for Q3FY12 includes INR187mn of income from fresh
securitization transactions (INR107mn in Q3FY11). MMFSL changed the accounting
policy from upfront recognition of securitization income to that of amortization over
the life of the loan hence the previous quarter numbers are not comparable.
Asset quality: Remains the good run, Q4 to see recoveries
GNPA at 4.1% and NNPA at 1.1% reiterate the presence of strong cash flows in the
rural economy. Coverage ratio stands at 74.4%. As is the case, Q4 witnesses increased
recovery drives on the back of which NPAs are likely to hold the current levels.
Outlook and valuations: Play on rural spirit; maintain ‘HOLD’
We believe that structural (growing non-farm income) as well as cyclical (demand in
rural auto segment) drivers are conducive for MMFSL’s asset and earnings growth. It
also implies that GNPAs are unlikely to touch the previous highs of 8%-9%. Regulatory
overhang has eased to an extent with clarity emerging on provisions and treatment of
off-book assets. We build in an asset and PAT CAGR of 25% and 21% over FY12-14E
respectively. Maintain ‘HOLD’ with a target price of INR 706/share
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