Buy MAS Financial Services; target of Rs 650: Motilal Oswal

Motilal Oswal's research report on MAS Financial Services

Consol. PAT grew 51% YoY to INR461m (30% beat), driven by higher-than-expected assignment transactions (INR7.8b; 16% of opening AUM) and related up-fronting of income (according to the regulation under Ind-AS). Standalone AUM increased 34% YoY to INR49.1b, driven by 35% YoY growth in micro-enterprise loans (MEL) to INR30.6b. MEL now comprises 62% of total AUM. SME loans stood at INR11.9b, comprising 24% of total AUM. Borrowing mix was largely stable sequentially. The share of assignment in overall funding stood at 50% versus 49% in the previous quarter. Cost of funds increased ~25bp QoQ to 9.1%. Incremental cost of funds stood at 9.75% in the quarter. Calculated margins were stable YoY at 8.5%. Asset quality has been largely stable - GNPL ratio increased by 10bp YoY to 1.3%, while NNPL ratio was stable at 0.9%.

Outlook

We increase our FY19/20 estimates by 12/6% to factor in higher assignment income in FY19 and higher AUM growth in FY20. Reiterate Buy with a TP of INR650 (3.2x Dec'20E BV, 18x Dec'20E earnings).