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

Motilal Oswal's research report on MAS Financial Services

Consol. PAT grew 28% YoY to INR416m (4% miss), driven by healthy AUM growth and stable asset quality, offset by margin compression. While operating profit was in line with estimates, higher credit costs and tax rate resulted in marginal PAT miss. Disbursement growth was 9% YoY v/s 30%+ YoY in the past two quarters. Consol. AUM grew 8% QoQ/29% YoY to INR55.6b. MEL and SME lending continued to drive loan growth (+30% YoY each). Interestingly, the 2W loan book declined 9% sequentially as disbursements in this segment were calibrated. Total income grew 20% YoY to INR1.02b vs AUM growth of 29% YoY. NIM compression of 70bp YoY was driven by higher cost of funds (+15bp YoY to 8.56%) and increase in leverage (debt/equity up from 2.5x to 3.1x YoY).

Outlook

We estimate ~25%+ AUM CAGR over FY19-22, with largely stable margins and healthy asset quality, resulting in RoA (on AUM)/RoE of 2.9%/19% in FY20/21. Our FY20-21 estimates are largely unchanged. Reiterate Buy with TP of INR700 (3x FY21E BVPS).