19 August 2020
1QFY21 Results Update | Sector: Financials
Muthoot Finance
Estimate change
TP change
Rating change
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CMP: INR1,256
TP: INR1,300 (+4%)
Neutral
Business muted; Liquidity on balance sheet increasing
Muthoot Finance’s (MUTH) 1QFY21 PAT increased ~60% YoY to INR8.4b (2%
miss). While total income missed our expectations by 8%, it was offset by
lower opex and credit costs. However, according to management, the cost
reduction is one-off and unlikely to sustain.
As the company opened branches in May’20, it witnessed more collections
than disbursements. Hence, its loan book declined marginally QoQ.
Standalone AUM moderated 1% QoQ to INR413b, driven by stronger
collections. However, disbursements picked up toward end-1QFY21 and
have sustained in 2QFY21 too. A key factor was the online disbursements
(wherein the company is offering cash-backs), which have jumped 4x since
the start of the lockdown.
~40% of customers are now transacting online.
The number of loan accounts and gold tonnage declined ~5% QoQ/YoY,
given the sharp increase in gold prices.
In 2HFY20, MUTH’s yields improved to 24-25% (earlier 21-22%), driven by
higher penal charges.
However, in 1QFY21, yields reverted to 23%. MUTH
has also offered cash-backs for customers transacting digitally.
Over the past year, the company has enhanced liquidity on its Balance
Sheet – from INR9b in 1QFY20 to INR85 in 1QFY21. The higher liquidity
weighed down on margins as borrowings have grown 38% YoY (v/s 15% YoY
growth in the loan book). Management has guided to keep liquidity on the
balance sheet at 10%.
Guidance of 15% AUM growth for FY21, irrespective of gold prices.
Collection efficiency in Jul’20 – MFI (76%), HL (87%), VF (75%).
MUTH took INR320m COVID-19 provisions for non-gold portfolio in 1QFY21.
Muthoot Homefin:
AUM stood at INR19.8b (flat QoQ/YoY) while PAT for
the quarter was only INR4m.
Belstar Investment and Finance:
Loan book was sequentially flat at INR26b
while PAT declined ~36% QoQ/YoY to INR145m. GNPL ratio deteriorated
20bp QoQ to 1.1%.
AUM largely steady; Yields decline off a high base; Enhanced liquidity
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
MUTH IN
401
503.8 / 6.6
1405 / 478
0/50/96
2077
Financials & Valuations (INR b)
Y/E March
2020 2021E
NII
57.7
63.4
PPP
41.5
47.3
PAT
30.2
34.1
EPS (INR)
75.3
85.1
EPS Gr. (%)
52.9
13.1
BV/Sh.(INR)
289
356
Ratios
NIM (%)
14.9
14.0
C/I ratio (%)
30.0
27.8
RoA (%)
6.8
6.5
RoE (%)
29.0
26.4
Payout (%)
19.9
17.0
Valuations
P/E (x)
16.7
14.8
P/BV (x)
4.4
3.5
Div. Yld. (%)
1.2
1.2
Shareholding pattern (%)
As On
Jun-20 Mar-20
Promoter
73.4
73.4
DII
7.3
7.1
FII
14.6
14.4
Others
4.7
5.1
FII Includes depository receipts
2022E
73.7
55.4
40.0
99.8
17.2
435
14.3
27.5
6.9
25.2
17.0
12.6
2.9
1.4
Highlights from management commentary
Subsidiary performance
Jun-19
73.5
8.4
13.9
4.3
Valuation and view
While AUM growth took a backseat in 1QFY21, we believe this is a one-off given
the muted disbursements in Apr-May’20. Demand for gold loans picked up in
Jul-Aug’20, and we expect it to sustain given the tough economic environment.
Over the past year, MUTH has increased liquidity on the balance sheet from 3%
of loans to 20% of loans, which is comforting. However, this is likely to be a drag
on margins going ahead. While MUTH’s subsidiaries have witnessed improving
collection efficiency, we remain cautious on the asset quality outlook. Maintain
Neutral
with TP of INR1,300 (3x FY22E BVPS).
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com) |
Piran Engineer
(Piran.Engineer@MotilalOswal.com)
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com)|
Divya Maheshwari
(Divya.Maheshwari@Motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
14 January
research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
1
Motilal Oswal
2020