7 June 2020
4QFY20 Results Update | Sector: Financials
Aditya Birla Capital
Estimate change
TP change
Rating change
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CMP: INR56
TP: INR84 (+51%)
Buy
Growth marred by macros; Asset quality under pressure
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
ABCAP IN
2,201
127.4 / 1.7
115 / 37
8/-34/-34
215
Financials & Valuations (INR b)
Y/E March
2020 2021E 2022E
PBT Break-up
NBFC
10.7
9.1
10.4
Housing
1.4
1.3
1.5
AMC
6.6
6.0
6.7
Life Insurance
1.4
1.5
1.7
Consol PBT
16.9
16.5
19.2
Consol PAT Post MI
9.2
9.2
10.7
Growth (%)
5.8
0.1
16.7
RoE (%)
8.3
7.0
7.6
Shareholding pattern (%)
As On
Mar-20 Dec-19 Mar-19
Promoter
70.5
73.6
72.7
DII
12.6
8.7
7.5
FII
2.2
2.4
3.7
Others
14.8
15.3
16.1
FII Includes depository receipts
ABCAP’s 4QFY20 consol. PAT plunged ~44% QoQ/YoY to INR1.4b while FY20
PAT was up 6% YoY to INR9.2b. PAT for NBFCs has plummeted 33%/40%
QoQ/YoY to INR1.37b due to (a) loans declining 9%/2% YoY/QoQ to
INR470b, and (b) higher credit cost (2.7% v/s 0.5% in 4QFY19), led by COVID
related provision of INR1.6b and 90bp QoQ rise in GS3 to 3.6% (+30% to
INR17b).
Other businesses: (a)
HFC loans were flat QoQ and up 6% YoY to INR121b,
(b)
AMC AAUM grew 1%/2% QoQ/YoY to INR2.67t; 4QFY20 PAT declined
24% QoQ/YoY to INR1b, impacted by mix change and INR200m MTM loss
on the investment book,
(c)
Life Insurance business reported EV of
INR51.9b (+6% YoY)and RoEV of 13.2%. 13
th
month persistency improved to
83% (v/s 81% a quarter ago), and
(d)
Health Insurance combined ratio
improved to 134% (v/s 149% a year ago) and stood at 117% in 4QFY20.
The transaction business has demerged from AB My-universe to ABCL
Wealth (part of the NBFC division).
Since business had losses, the company
could manage to get tax benefit at the NBFC level; however, it had Net
worth (NW) impact of INR1.47b.
We expect the company to consolidate operations in the near term and to
focus on liquidity, asset quality and cutting flab in the system.
New
businesses like ARC and Health Insurance are showing strong traction.
While large profit contributors – Lending and the AMC business – would
remain under pressure, reduction in losses for new businesses and capital
raise at Holding Company level should lead to ABCAP reporting flat YoY
profit in FY21. Nevertheless, consolidated RoEs are likely to be moderate at
7-8%. Maintain
Buy
with SOTP of INR84 (v/s INR105 earlier).
Lending business – focus on improving granularity
NBFC loans stood at INR471b (down 2%/9% QoQ/ YoY). The share of
Promoter and UHNI loans declined from 9.5% to 4.3% YoY, which was
compensated by rise in the share of Retail to 19% (13% a year ago). Within
Retail, Unsecured Business loans and Personal loans and LAP are ABCAP’s
key focus areas. Further, share of large corporates has declined by 200bp to
45% (down 13% YoY in absolute terms). NIMs (including fees) are stable
YoY at 5.25%.
The company remains increasingly focused on the lower ticket size segment
in HFC. Share of affordable housing has increased 1,400bp over the last
four quarters to 19%. Its HFC book stood at INR121b (flat QoQ, up 6% YoY).
In the NBFC/HFC business, INR140b/INR23b of liability maturity is expected
in FY21. The NBFC/HFC business has INR37.4b/INR4.3b cash in hand and
~INR30/INR25b of undrawn sanctions in hand.
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com);+91 22 6129 1526 |
Piran Engineer
(Piran.Engineer@MotilalOswal.com); +91 22 6129 1539
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
Divya Maheshwari
(Divya.Maheshwari@motilaloswal.com); +91 22 6129 1540
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.