January 25, 2017 / 17:48 IST
MMFS’ 3QFY17 results were below estimates. Led by higher provisions (Rs 4.2bn, +38% QoQ) and muted NII (interest reversals of Rs 650mn), it reported a PBT loss of Rs 241mn. However, RBI’s forbearance enabled MMFS to report 1.5% lower GNPAs (11.1%) and postpone P&L impact of Rs 1.5bn.
OutlookOur earnings estimates for FY18/19E fall 20/8% to factor in lower NIMs and higher provisions. While the shift to 90DPD will keep GNPA elevated, the post-demonetsiation pickup (or otherwise) in 4QFY17 is key. MMFS is a leveraged agri/rural play, so a faster-than-anticipated recovery will boost earnings disproportionately. Maintain BUY. Revise TP to Rs 333 (3x Dec-18 ABV + Rs 8 for MIBL).
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