Capital First Ltd.| Q2FY15 Result Update | Stellar performance continues as reported numbers beat our expectations with 34% y-o-y AUM growth; upgrade to BUY with revised price target of Rs 400/- (2.3x of FY16E) :: IndiaNivesh

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Net Interest Income (NII) of CFL increased at a robust pace of 55% y-o-y (+13%
q-o-q) to Rs 1.5 bn (our estimate: Rs 1.4 bn) in Q2FY15. Interest income grew 34%
y-o-y (+6% q-o-q) to Rs 3.4 bn. However, interest expense increased at a much slower
pace of 20% y-o-y (+2% q-o-q) to Rs 1.9 bn.
Operating expenses increased 23% y-o-y (+9% q-o-q) to Rs 907 mn in Q2FY15.
However, within operatin expenses, employee expenses increased marginally by
2% y-o-y to Rs 328 mn which shows improving efficiency and productivity of the
employees. Pre Provisioning Profit (PPP) increased 155% y-o-y (+14% q-o-q) to Rs
612 mn (our estimate: 588 mn). The sharp increase in y-o-y growth of PPP was
mainly due to changed in accounting policy from FY14. The company started
amortizing processing fees over the tenure of the loan as against earlier policy of
booking the said fees at upfront. Hence, in the initial quarters after this change of
accounting policy, the company reported lower profits compared to quarters prior
to this change.
Total Provisions increased 71% y-o-y (+2% q-o-q) to Rs 215 mn in Q2FY15 which
might have also helped the company to reduce its Net NPA. Net profit of CFL
increased 18% q-o-q to Rs 259 mn (our estimate: Rs 245 mn). The company reported
net loss of Rs 240 mn in the Q2FY14 as the company closed down its loss making
broking business in Q2FY14 and as a result it had to book a loss of Rs 315 mn under
the head of exceptional items. However, if we adjust that one-off transaction than
adjusted net profit of CFL increased 245% y-o-y

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