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MOSL: MAS FINANCIAL SERVICES: Regains its mojo with healthy disbursements and stable asset quality

.  MAS FINANCIAL SERVICES: Regains its mojo with healthy disbursements and stable asset quality 

(MASFIN IN, Mkt Cap USD0.4b, CMP INR566, TP INR720, 27% Upside,

• MASFIN’s PAT rose 26% YoY to INR465m (in line). Total income grew 34% YoY to INR1.06b (11% beat) and OPEX jumped 133% YoY to INR348m.
• Credit costs stood at INR85m (v/s our estimate of INR75m), up 124% QoQ but down 40% YoY in 1QFY23.
• MASFIN delivered a quarterly disbursement of ~INR21.5b (up 10% QoQ and 107% YoY).
• Asset quality was stable QoQ at 2.3% and continued to remain relatively better than its peers in MSME/ SME lending. Capital adequacy as well as liquidity on the balance sheet continued to remain healthy.
• Maintain BUY with a TP of INR720 (premised on 2.4x FY24E BV)

AUM up 7% sequentially; spreads stable while margins improve

• Standalone AUM grew 30% YoY to INR66.8b. Housing subsidiary AUM rose 16% YoY to INR3.4b. In the AUM mix, Micro Enterprise (MEL) rose 27% YoY while SME grew 35% YoY. AUM of 2Ws was flat YoY.
• MASFIN has started undertaking assignment transactions but the share of off-Balance Sheet loans still declined 100bp QoQ to 18%.
• Yield on loans (calc.) and CoF declined ~40bp QoQ each to 12.7%/ 7.7%, respectively. This led to overall spreads remaining stable sequentially.
• Operating expenses continued to remain elevated, with the C/I ratio increasing ~30bp QoQ to ~33% since the company started making investments in building capacity and expanding distribution.

 

Asset quality healthy and sequentially stable

• GS3 ratio was stable at 2.3% while NS3 declined 7bp QoQ to 1.6%
• 1+dpd loans contracted ~30bp QoQ to 5.1%. Total standalone COVID provisions stood at INR340m (0.62% of on-book loans) in 1QFY23.
• Total restructured advances stood at INR237m (~35bp of AUM).