Buy MAS Financial Services Ltd For Target Rs.360 by Choice Institutional Equities
Resilience across Segments:
MASFIN Q2FY27 AUM growth was driven by MEL, SME and Salaried Personal Loan (SPL) segments. Total AUM grew by 23.2% YoY / 5.7% QoQ. MEL AUM expanded by 8.6% QoQ (+28.3% YoY) to INR 66.8 Bn, SPL segment’s AUM grew by 6.1% QoQ (+24.3% YoY) to INR 14.6 Bn and SME Loans increased by 4.3% QoQ (+23.5% YoY) to INR 57.2 Bn.
Sustained Profitability Supported by Higher NII and Lower Opex, Partially Offset by Higher Provisions
* MASFIN reported quarterly PAT of INR 1,101 Mn in Q2FY27, up 22.7% YoY and 5.2% QoQ, driven by a strong AUM growth momentum, NII growth and slower-than-expected growth in operating expenses
* Standalone AUM grew by 23.2% YoY (5.7% QoQ) to INR 160.1 Bn, primarily driven by the strength observed across MEL, SPL and SME segments
* NII advanced by 44.3% YoY (+1.5% QoQ) to INR 2,374Mn, aided by resilience in on-book AUM growth
* Average yields on Loans (calculated) declined sequentially by 58 bps to 16.3% (vs. 16.9% QoQ) led by softness in 2W and CV segment
* Non-interest income grew marginally by 2.5% YoY (+14.3% QoQ) to INR 846 Mn, accounting for 26.3% of the total income
* Asset quality increased sequentially, led by increase in stage 2 and stage 3 assets. GNPA increased to 2.70% (+12 bps QoQ) while NNPA increased to 1.52% (+6 bps QoQ)
Increase in Provisioning to offset Higher NII Driven by Stronger On-book AUM Growth
MASFIN is anticipated to witness AUM and Loan CAGR of 24.6% and 29.2%, respectively, over FY26–28E, driven by its stronger focus on MEL and SME Loan portfolio. The company remains focussed on driving operational efficiency by controlling growth in operational expenses. It has added only one branch in last one year, whereas its Cost-to-AUM declined sequentially by 4 bps to 2.86% in Q2FY27. We have increased our NII estimate by +2.3%/ +3.1% for FY27E/FY28E, respectively, as we bake in higher on-book AUM growth. Driven by higher share of retail portfolio, we factor in higher provisions, impacting profitability by -4.7%/-8.1% for FY27E/FY28E, respectively. We forecast the annualised RoAA to remain at 3.1% / 3.1% in FY27E/ FY28E, respectively.
View and Valuation:
We revise our FY27E/FY28E PAT estimate by -4.7%/-8.1%, respectively, despite higher NII impacted by increase in provision on losses. We value MASFIN on its standalone lending business, at 1.8x FY28E ABV, indicating a 43.2% upside from the current level, thus retaining our ‘BUY’ rating on the stock. MASFIN currently trades at 1.4x/1.3x P/ABV of its FY27E/FY28E estimate.
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SEBI Registration no.: INZ 000160131
