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Good performance across business segments

ABCAP delivered a decent performance across its key businesses during Q4FY24, with i) lending businesses continuing their growth momentum given focus on asset quality and profitability, ii) the AMC business delivering the highest-ever PAT during FY24 with momentum across equity markets, and iii) the insurance businesses keeping up the robust growth with improvement in profitability. ABCAP continues to leverage its digital capabilities and the ABG ecosystem, to further scale up the lending AUM. Management remains confident about doubling its FY23 lending AUM by FY26, and the RoA inching up to 3% over the next three years. Management expects to deliver robust topline growth across the insurance businesses, and improving the CoR to 100% in the Health Insurance business by FY26. To reflect the Q4 developments, we tweak our FY25-26 estimates which results in ~1-2% increase in our PAT estimate. We reiterate our BUY rating on the stock, with unchanged Mar-25E target price of Rs250/share.

Robust performance across businesses:

During Q4FY24, the NBFC business saw robust AUM growth of 31% YoY and 7% QoQ, with NIM remaining largely flat YoY and QoQ at 6.86% and resulting in RoA of 2.4%. The company acquired a loan portfolio amounting to ~Rs47bn for FY24/Rs23.4bn for Q4FY24. The housing finance business saw AUM growth of 33% YoY and 11% QoQ, led by 45% QoQ disbursement growth. With NIM at 5.15% (+0.1ppt YoY) for Q4FY24, RoA stood at 1.76%. The Life Insurance business saw 2% YoY growth in Individual APE during FY24, despite the bumper sales during Q4FY23. The top-line growth was largely driven by the ULIP segment, which contributes to 24% of the product mix. With VNB margin at 20.2% (-2.8ppt YoY), VNB saw 13% YoY decline. For the quarter, the Health Insurance business witnessed 45% growth in GWP, with the company reporting its first quarter of profitability given PBT of Rs0.88bn. For FY24, Combined Ratio at 110% remained flat on YoY basis. (Exhibits 1,4)

Confident outlook across business segments

In the NBFC space, Management reiterated its guidance of doubling FY23 AUM by FY26, with aspirations to expand RoA to ~3% from current 2.5%. As regards the HFC segment, Management stated that NIM is expected to compress in the near term, even as it endeavors for its RoA to inch up to 2.1% within the next three years, from 1.9% now. For the Life insurance business, Management expects topline to see a robust >20% CAGR over the next 3 years, with VNB margin expected to remain stable in the 18-20% range. ABHI was among the fastest-growing insurers, and Management expects the growth momentum to endure, led by product launches; Combined Ratio is expected to improve to 100% by FY26.

We reiterate BUY with unchanged TP of Rs250/share

To reflect the Q4FY24 developments, we tweak our FY25-26 estimates which results in a 1-2% increase in PAT estimates. We reiterate our BUY rating on the stock, with unchanged TP of Rs250/share. Given its omni channel distribution strategy, digital capabilities and the ABG ecosystem, ABCAP is on the right track to witness a profitable growth journey.

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