Poonawalla Fincorp Ltd. share price target

Poonawalla Fincorp (PFL) delivered on its stated strategy in Q2FY23 registering an RoA of 3.6%, organic disbursement growth of 32.4% QoQ, focused AUM growth of 10.6% QoQ, net stage-3 at 0.83%, and credit cost reversals.

Magma Fincorp was incorporated in 1988 and began by offering vehicle and equipment financing solutions to individuals and small businesses in India. It later included CV, tractor finance, SME loans as well as insurance. As on Q1FY20, it has an AUM of | 17312 crore across auto, agriculture, SME &...

and superior liability franchise (higher share of bank borrowings). However, after this event, the risk of uncertainty has re-emerged amid an adverse vehicle demand cycle. We are cutting our AUM CAGR estimate to ~13% for FY19-21 vs. ~15% earlier, resulting in a decline in FY20E earnings by ~15%. We believe markets would await clarity on new...

Operating Income increased by 0.02% to Rs. 586.18 Cr in Q1FY19 when compared to the previous quarter. Magma Fincorp Ltd Q1FY19 results Comment

Legacy stressed provisions done; profitability set to improve Magma Fincorp (Magma) recorded a healthy performance in a seasonally weak quarter with PAT of INR 681mn (up 75% YoY) on IndAS basis. Magma has adjusted one-time provisions of INR 6.2bn with its net worth (of which c.INR 3bn is on account of legacy stressed loans originated prior to Dec'15). This will substantially reduce provisions going forward and boost RoEs to 14-16% range. Key highlights: i) GNPL ratio reduced to 9.5% (vs. 11.7% in 1QFY19) while coverage ratio strengthened to 56% vs. 43% YoY. ii) Disbursement growth remained strong (25% YoY) driven by used assets, commercial vehicles and SME. iii) Margins...

Legacy stressed provisions done; profitability set to improve Magma Fincorp (Magma) recorded a healthy performance in a seasonally weak quarter with PAT of INR 681mn (up 75% YoY) on IndAS basis. Magma has adjusted one-time provisions of INR 6.2bn with its net worth (of which c.INR 3bn is on account of legacy stressed loans originated prior to Dec'15). This will substantially reduce provisions going forward and boost RoEs to 14-16% range. Key highlights: i) GNPL ratio reduced to 9.5% (vs. 11.7% in 1QFY19) while coverage ratio strengthened to 56% vs. 43% YoY. ii) Disbursement growth remained strong (25% YoY) driven by used assets, commercial vehicles and SME. iii) Margins...

Magma Fincorp (MGMA) adopted IND AS from Q1FY19 and adjusted its legacy stressed portfolio against net worth resulting in overall impact of ~Rs5.54bn in net worth. The move will ensure lower credit costs in future as well as superior RoEs due to low base MGMA reported robust disbursement growth of ~25% yoy, led by Used assets at 28% yoy, Commercial Vehicles at 150% yoy and SME Segment at 34% yoy Gross Stage 3 (GNPAs) stands at ~9.5% as on June 2018 against ~11.7% in June 2017 - NNPA has come down to 4.4% as on June 2018 against 7.0% as on June 2017; whereas PCR stands at 56% as on June 2018, compared to 42.8% as on June 2017...

Assets quality witnessing improvement: During FY11-FY13, MGMA shifted its focus from CV/CE financing to other segments such as tractor/SME in order to enhance the yield on book and leverage opportunities in rural areas. While MGMA gained market share in tractors and UV/cars led by aggressive growth, rural stress in 2014 and 2015 offset the benefit of yield and GNPA ratio, which was at 0% in FY12 increased to 1.6%/3.6% in FY13/14 and worsened to 8.1% in FY16. Demonetization, a govt's move to check black money in economy, further added to woes and the company GNPA increased to ~10% by Q3FY17....