Buy MAS Financial Services Limited for the Target Rs.405 by Choice Institutional Equity
Strong Growth across Segments:
MASFIN posted strong AUM growth across 2-Wheeler, SME and Salaried Personal Loan (SPL) segments. Total AUM grew by 18.7% YoY / 4.2% QoQ. SPL segment’s AUM grew by 6.6% QoQ (+21.6% YoY) to INR 12.6 Bn, SME Loans increased by 5.8% QoQ (+15.8% YoY) to INR 52.1 Bn and 2-Wheeler Loans grew by 4.0% QoQ (+35.4% YoY ) to INR 57.4 Bn.
View and Valuation:
We revise our FY27E/FY28E PAT estimate by -3.2% / +0.1%, respectively, driven by higher provisions partially offset by higher NIM margin. We expect expansion in NIM margin driven by improvement in average yield and reduction in Cost of Funding (CoF) over FY27E–FY28E. We value MASFIN on its standalone lending business, at 2.0x FY28E ABV, indicating a 20.0% upside from the current level. We retain our BUY rating on the stock. The stock currently trades at 1.9x/1.7x P/ABV of its FY27E/FY28E estimate.
Stronger Profitability Supported by NII and Other Income, Partially Offset by Higher Provisions
* MASFIN reported an all-time high quarterly PAT of INR 997 Mn in Q4FY26, up 23.4% YoY and 10.4% QoQ, driven by resilient AUM growth, stronger NII growth and slower growth in operating expenses
* Standalone AUM grew by 18.7% YoY (4.2% QoQ) to INR 143.6 Bn, majorly driven by robust growth of 35.4% YoY in 2-Wheeler Loans and a 21.6% YoY growth in SPL
* NII advanced by 24.6% YoY (+19.0% QoQ) to INR 922 Mn, driven by improvement in NIM margin
* Average NIM on Loans (Calculated) improved sequentially by 44 bps to 16.7% (vs. 16.3% QoQ) led by stronger growth in 2-Wheeler and SPL portfolio, and partnership with a new Fintech partner
* Non-interest income increased 45.2% YoY (-0.3% QoQ) to INR 922 Mn, accounting for 31.3% of the total income
* Asset quality remained stable led by conservative underwriting and strong collections efficiency across segments. GNPA improved to 2.60% (-2 bps QoQ) and NNPA improved to 1.51% (-6 bps QoQ)
Higher Provisions and Operating Expenses to Affect Future Profitability
MASFIN is anticipated to sustain AUM growth of 23.8% CAGR over FY26–28E, driven by its stronger focus on SME and Wheels Loan portfolio. It has added over 24 NBFC partners in the last one year. The company guides to add over 30 to 35 branches to its network in FY27E, to support AUM growth. Despite increase in Cost-to-AUM to 2.95% in Q4FY26, the RoA improved to 3.08%, driven by increase in NIM on IEA (calculated).
We project a decline in CoF by 5 bps and 25 bps in FY27E and FY28E, respectively, which will drive improvement in NII by +3.1%/ +3.2% over FY27E/FY28E, as compared to our previous estimate. Higher provisions is forecast to negatively impact profitability by 3.2% in FY27E, while the annualised RoAA to remain at 3.0% / 3.2% over FY27E/ FY28E, respectively
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SEBI Registration no.: INZ 000160131
