Mas Financial Services Ltd. share price target

We revise our rating from HOLD to BUY and revise the target price to Rs. 978. (3.4x FY23E BV).

While disbursements improved QoQ, they were still ~80% of YoY levels (in line with the management's guidance). As a result, consolidated AUM declined 4% QoQ/ 15% YoY to INR53b. The loan mix remained largely stable with the share of MSME/SME loans at 60%/31%. The share of off Balance Sheet loans declined sharply to 33% from 42% QoQ. However, the company has DA sanctions worth INR10b. Yield on loans (calc.) declined ~200bp QoQ to 13.4%. While this was offset by an 80bp decline in the CoF, overall spreads fell 130bp to 5.2%....

we expect the collection efficiency to reach pre-COVID levels in the next quarter and the disbursements would pick-up by FY22E.

MAS' AUM growth is likely to be driven by micro enterprise loans as the borrowers in this segment have seen a good pick-up in their economic activity especially in Gujarat where MAS is predominantly present.

4 June 2020 MASFIN reported 4QFY20 PAT at INR357m (69% beat due to lower-than- est. 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 Mar20, 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-May20; it expects to gradually start disbursements from Jun20. 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-May20 collections were ~45-50% in terms of value. We largely maintain our estimates for FY21/22E and expect R0A/RoE at ~2.

7 February 2020 MASFINs 3QFY20 PAT of INR551m (25% beat, +21% YoY) was Core business trends remained stable; disbursements have been range- bound at INR12-13b since the start of the IL&FS; crisis. Hence, AUM growth has slowed from 26% YoY in 2QFY20 to 20% YoY in 3QFY20. Total income jumped ~20% QoQ on higher upfront assignment income (up 40% QoQ to INR344m) and 6% QoQ decline in interest expense. Since the crisis, the company has taken a cautious stance on its auto and housing finance segments. While the auto finance (2W + CV) book has declined 7% YoY, the QoQ growth in the CV segment was strong at 15%. cost of funds is down ~70bp QoQ to 9.2% YoY. The share of direct assignments in total borrowings increased 200bp QoQ to 50%. Overall, the company maintained largely stable spreads at 7.1% on a YoY basis.

PAT grew 34% YoY to INR407m (in-line) in 1QFY20, driven by healthy AUM growth and stable asset quality, partly offset by margin compression. While operating profit missed our estimate by ~5%, lower credit costs led to inline PAT. Disbursements (standalone) increased 21% YoY to INR12b. AUM grew 4.5% QoQ (+29% YoY) to INR55.8b (in-line). MEL and SME lending continued driving loan growth (+30% YoY). 2W and CV loan book declined by 2-4% QoQ, as disbursements in these segments were calibrated. NIM compression of 50bp YoY (calc.) restricted net income growth to 21%...

4 September 2018 MAS Financial Services (MASFIN) PAT (Ind-AS) rose 80% YoY to INR313m, driven by higher operating profit (+64% YoY) and stable asset quality. With disbursement growth of 24% YoY, AUM rose 30% YoY to INR42.5b. Growth was broad-based across segments (in the range of 20-35% YoY). Margin expanded 100bp YoY, driven by a 25bp YoY decline in CoF. Margin improvement, operating efficiency and controlled credit cost are expected to lead to RoA improvement of 60bp+ and consistent RoE of small base and presence in well-developed states for strong growth, (b) relentless management focus on generating sustainable, high return ratios, (c) healthy capitalization and d) consistent and healthy asset quality, despite catering to the lower end of the socio-economic customer segment. Housing finance) grew 3% QoQ and 30% YoY to INR42.5b, driven by 24% YoY growth in disbursements to INR10.

MAS Financial Services (MASFIN) reported PAT of INR299m (up 2x YoY),driven by higher operating profit (+85% YoY) and stable asset quality. With disbursement growth of 18% YoY, AUM rose 30% YoY to INR41b.Growth was broad-based across segments (in the range of 20-35% YoY). The share of various products in total AUM is as follows: MEL: 63%, SME finance: 25%, 2W finance: 9% and CV finance: 4%. Over the past year, the share of MEL + SME finance has increased by ~500bp