MOSL: CAPITAL FIRST (Buy)-Strong performance-Migrated to 90dpd NPL recognition
​Capital First: Strong performance; Migrated to 90dpd NPL recognition
(CAFLIN, Mkt Cap USD1.2b, CMP INR781, TP INR925, 18% Upside, Buy)
- Capital First’s (CAFL) 1QFY18 PAT grew 37% YoY to INR672m, driven by strong AUM growth, NIM expansion and stable asset quality.
- AUM grew 24% YoY to INR214b, despite a high base (+36% YoY in 1QFY17). Sequential AUM growth of 8% is encouraging, in our view. Growth was robust across segments, except secured MSME financing, where the company is intentionally slowing down.
- Consumer durables loan book grew 22% QoQ and 57% YoY to INR31b, now accounting for 15% of total loan book v/s 12% in 1QFY17. Housing finance book also grew by a strong 45% YoY, albeit off a low base.
- NIM (on AUM) expanded 130bp YoY to 8%, driven by higher yields and lower cost of funds. Yield on AUM at 14% was up 70bp YoY (largely due to changing loan mix in favor of higher-yielding 2W/CD products). Cost of funds fell 40bp YoY to 8.5%. We believe there is further scope for margin expansion with increasing yields and moderating cost of funds.
- Expense ratio continues to inch upward due to investments in technology, coupled with changing asset mix (2W/CD loans have higher expense ratios compared to LAP). Opex/avg. AUM increased from 4.1% in 1QFY17 to 5.3% in 1QFY18.
- Asset quality remained stable. CAFL migrated to 90dpd NPL recognition in the quarter – this added 40bp to the reported NPL. On a 90dpd basis, GNPL ratio remained stable at 1.72% (+7bp QoQ).
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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