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MOSL: MAS Financial Services (Buy)-Growth slows down, but profitability improves

MAS Financial Services: Growth slows down, but profitability improves

(MASFIN IN, Mkt Cap USD0.9b, CMP INR1115, TP INR1200, 8% Upside, Buy)

 

• MASFIN’s 3QFY20 PAT of INR551m (25% beat, +21% YoY) was driven by higher upfront assignment income and lower cost of funds, marginally offset by higher opex and credit costs.
• 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.
• However, write-offs in 9MFY20 were 85% higher YoY at INR515m.
• We upgrade our FY21E estimates by 11% to factor in the strong performance. We forecast 18-19% AUM as well as PAT CAGR over FY20-22E. Buy with TP of INR1,200 (4.5x Dec’21E BVPS). 

AUM growth continues to be driven by MSME and SME lending

• 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%.
• In the MSME and SME segments, AUM growth remained healthy – 18% in MSME lending and 40% in SME lending. The share of MSME/SME lending currently stands at 62%/28%.