Buy MAS Financial Services; target of Rs 700: Motilal Oswal

Motilal Oswal 's research report on MAS Financial Services

MASFIN reported 4QFY20 PAT at INR357m (69% beat due to lower-than-est. COVID-19 provisions). For FY20, PPoP grew 11% YoY, in line with AUM growth (flat QoQ). While PBT was flat YoY at INR2.3b, lower tax rate led to a 17% YoY growth in PAT to INR1.8b. Estimated disbursement loss of INR3.3b during the lockdown in Mar’20, led to flat AUM QoQ to INR59.7b (up ~12% YoY). Due to the lockdown and lack of visibility, the company did not disburse in Apr-May’20; it expects to gradually start disbursements from Jun’20. Share of SME lending increased 160bp QoQ to 30% and 2W/CV portfolio declined 100bp QoQ. The company remains extremely comfortable on capitalization (Tier I ~29%), leverage (debt to equity) of ~3x and liquidity with cash (incl. undrawn sanction) of INR14b (sufficient to service one year of debt obligations). Apr-May'20 collections were ~45-50% in terms of value. We largely maintain our estimates for FY21/22E and expect R0A/RoE at ~2.7/16%.

Outlook

We like MASFIN’s focus on profitability over growth. In this environment growth is likely to remain muted. We largely maintain estimates. The stock trades at 2.9x/2.6x P/B of FY21/22E. Buy with a TP of INR700 (3x FY22E BV).

MAS Financial Services 06062020

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