Buy Equitas Holdings; target of Rs 190: Axis Direct

Axis Direct's research report on Equitas Holdings

Q4FY17 was subdued due to moderation in AUM growth, significant decline in margin and further deterioration in headline asset quality. Additionally, higher operating expenses (due to opening of liability branches) & accelerated provisions (for impaired MFI portfolio) led to much lower-than-expected PAT of Rs 69 mn (down 85% YoY).

Outlook

We cut earnings for FY18E and FY19E by 9%/3% to factor in potential write-offs and cautious growth and, value Equitas at 2.5x FY19E P/ABV to arrive at a TP of Rs 190 (18% upside from CMP). At CMP, Equitas trades at 2.3x/2.1x FY18/19E P/ABV of Rs 69/Rs 76 respectively.