MOSL: CAPITAL FIRST (Buy)-Strong growth, gradually improving profitability
Capital First: Strong growth, gradually improving profitability
(CAFL IN, Mkt Cap USD1.2b, CMP INR771, TP INR960, 25% Upside, Buy)
- Capital First’s (CAFL) PAT grew 42% YoY to INR870m (2% ahead of our estimate) in 3QFY18, in line with the trend of the past few quarters. Strong AUM growth (32% YoY) and a 150bp YoY improvement in margins were the key highlights of the quarter.
- AUM grew 8% QoQ (festive season impact) and 32% YoY to INR248b – 4% ahead of our estimate of INR241b. Growth was driven by the consumer segment (2W, CD, home loans, used vehicles), which grew 56% YoY, while the LAP & business loans portfolio grew 24% cumulatively.
- Another key highlight of the quarter was the 50bp sequential increase in calculated yields (on AUM) – this is largely a function of the evolving product mix. With a modest uptick in cost of funds, both spreads and margins expanded 40bp sequentially to 6.9% and 8.8%, respectively. On a YoY basis, though, spreads/margins expanded 180bp/150bp. We believe there is still more scope for margin improvement over the next two years, as the share of high-yielding loans (2W and CD) continues to increase.
- Asset quality remained stable, with a GNPL/NNPL ratio of 1.6%/1%. Credit cost (on AUM) too has been largely stable QoQ and YoY at 2.8%.
- The proposed merger with IDFC Bank would support the growth story of CAFL, as it would get a well-set banking platform, which we believe is necessary for scaling up over the long term. We believe the financial benefits from the merger would outweigh the regulatory drag on earnings (PSL, CRR, SLR, etc.)
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.