MOSL: ADITYA BIRLA CAPITAL (Buy)-Loan book consolidates, Asset quality deteriorates
ADITYA BIRLA CAPITAL: Loan book consolidates, Asset quality deteriorates
(ABCAP IN, Mkt Cap USD3.2b, CMP INR99, TP INR125, 26% Upside, Buy)
- ABCAP’s 3QFY20 earnings reflect another modest quarter for its key segments of lending and asset management. Consol. PAT increased 17% YoY to INR2.4b, but has remained range-bound since 4QFY19. NBFC’s PBT declined 16% YoY due to moderate loan growth (+3% YoY) and deterioration in asset quality (GNPA +85bp QoQ to 2.72%). AMC’s PBT grew 5% YoY led by control over opex.
- We expect loan book consolidation to continue in the near term; however, growth in Retail/SME businesses is expected to be strong. Overall, we expect ~20% PAT CAGR helped by the stable AMC business, reduction in health insurance business losses and repayment of debt at the HoldCo level. Buy with SOTP-based TP of INR125 (Sep’21 based).
Lending business – Asset quality under pressure
- The company continues to run down its loan book – it declined 1% QoQ/3% YoY to INR479b. The share of corporate continues to decline (down 100bp QoQ and 400bp YoY to 49%).
- Due to its cautionary stance, the structured finance book has more than halved on YoY basis to INR17b while the LAS book to promoters and UHNIs has declined 40% YoY to INR29b.
- On the borrowing side, the share of term loans increased 300bp QoQ to 44%, offset by a similar decline in share of NCDs to 35%. Margins improved 40bp YoY to 5.25%.
Aditya Birla Capital Ltd. Aditya Birla Capital Limited, formerly Aditya Birla Financial Services Limited, is an investment company. The Company, through its subsidiaries, provides financing, investment, protection and advisory services to its customers and clients. Its financing services include lending, financing and wealth management solutions, customized solutions in areas of personal and business loans, corporate finance, mortgages, capital market based lending, housing finance solutions such as home loans, home improvement and construction loans. Its investment services include asset management services, investment solutions, portfolio management services, investment advisory services and securities broking. Its protection services include protection solutions, children's future solutions, wealth with protection solutions, health and wellness solution, and health insurance. Its advisory services include insurance broking and risk advisory solutions to companies and individuals.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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