MOSL: CAPITAL FIRST (Buy)-Strong AUM growth-Return ratios stable
​Capital First: Strong AUM growth; Return ratios stable
(CAFL IN, Mkt Cap USD1.2b, CMP INR756, TP INR925, 22% Upside, Buy)
- Capital First's (CAFL) 2QFY18 PAT grew 36% YoY to INR785m, in line with the trend of the past few quarters, driven by strong AUM growth, NIM expansion and stable asset quality. AUM growth of 7% QoQ/28% YoY to INR230b surprised us positively. Growth continues to be driven by consumer durables and 2W loans, which grew 64% and 40%, respectively. While LAP AUM increased only 12% on a YoY basis, sequential growth was 5%. We believe this segment can deliver 15%+ YoY growth from the next quarter.
- Over the past year, the share of LAP has declined 500bp to 40%. On the other hand, the share of CD financing increased 300bp to 14%, while other segments witnessed modest share expansion.
- A sharp sequential decline in CoF (40bp) drove 60bp sequential spread expansion. NIM at 8.4% is at an all-time high, and will continue increasing, in our view, with gradual migration toward high-yield lending products.
- Given investments in new businesses, coupled with the scaling up of existing businesses, the expense ratio increased modestly from 1.2% to 1.3%.
- Asset quality remained stable. GNPL ratio improved 9bp to 1.63%. As per our calculations, write-offs increased from INR1.08b in 2QFY17 to INR1.44b in 2QFY18. The sharp increase is due to seasoning of the loan book, coupled with an increasing share of unsecured lending.
Capital First Ltd. Capital First Limited is an India-based financial company, which is focused on providing debt financing to micro, small and medium enterprises (MSMEs) and Indian consumers. The Company's products include personal loans, business loans, loan against property, two wheeler loans, pre-owned car loan and insurance. The Company also provides other credit granting services. The Company provides financing for various purposes, such as business expansion, loans for plant and machinery, office furniture, display panels, office automation (such as personal computers), laptops and printers. The Company offers consumer durable loans for digital products, such as cameras and accessories, laptops and desktops, and mobiles and tablets, and non-digital products, such as television, refrigerator, air conditioner, microwave, washing machine and audio. The Company, as a corporate agent, also distributes life insurance products and general insurance products offered by insurance companies.
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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