Strong performance continues SCUF: HDFC Securities

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Strong performance continues SCUF’s NII was in-line with estimates led by healthy NIMs and a marginal pick up in AUM (+8% YoY). However, with higher staff cost and provisions, PAT was marginally lower than estimates. Ex-gold, disbursements/AUM grew ~26/5% QoQ, while gold disbursements declined ~15% QoQ. Small business loans (MSME)/2-W segments continued the strong growth trajectory. GNPA increased ~11% QoQ, largely driven by ex-gold portfolios. With decline in PCR (79%), NNPAs were up ~17% QoQ. With an expected pick up in macros & the worst to be behind in the southern region, coupled with a well funded B/S, we believe a pick-up in growth is imminent. Despite factoring a NIM decline, we expect RoA to remain healthy led by improving efficiency & moderate growth in provisions. Maintain BUY. Our revised TP is Rs 2,324 (2.75x FY17E ABV).  As expected, disbursements grew ~9% to ~Rs 45bn for the second consecutive quarter. Disbursements ex-gold increased ~26% QoQ led by strong growth in MSME (Rs 18bn, +31% QoQ) and 2W disbursements (Rs 9.25bn, +24% QoQ). Management maintained its strong growth disbursements outlook for MSME & 2W segment (20%+ sustainable) in the coming quarters. PL disbursements saw a steady rise of 6% QoQ, while gold disbursements declined 15% QoQ to Rs 14.5bn.  With a strong growth in disbursements, AUM growth was ~8% YoY (highest in the last seven quarters) to Rs 162bn. AUM ex-gold grew ~10% YoY, dragged by Auto loans (Rs 12.9bn, 8% of AUM) and complete run-down in the CD segment (SCUF has exited the segment in the last 12 months). However, MSME (Rs 85bn, +17/6% YoY/QoQ; 53% of AUM) & PL segment (Rs 5.9bn, +12/11% YoY/QoQ; 4% of AUM) maintained a strong growth. Over the medium term, management expects the MSME portfolio to form ~70% & 2-W to form ~20% of loans. We have factored AUM growth to 22% over FY15-17E.  NII at Rs 5.7bn (+22/11% YoY/QoQ) was ahead of our estimates driven by continued improvement in NIMs. Margins of 14.3% remained healthy with a steady rise in the high yielding MSME & 2-W portfolio and 12bps QoQ decline in CoF to 11.4%. We have factored NIM (calc.) of ~13% over FY16-17E flat over avg. FY14-15E.

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http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3011074