Buy MAS Financial Services Ltd For Target Rs.405 by Choice Institutional Equities Ltd
Strong Growth across Segments:
MASFIN Q1FY27 outperformance was driven by stronger AUM growth observed across MEL, SME and Salaried Personal Loan (SPL) segments. Total AUM grew by 21.1% YoY / 5.5% QoQ. SPL segment’s AUM grew by 8.7% QoQ (+21.5% YoY) to INR 13.7 Bn, MEL AUM grew by 7.2% QoQ (+22.8% YoY) to INR 61.5 Bn and SME Loans increased by 5.2% QoQ (+21.2% YoY) to INR 54.9 Bn
Higher On-book AUM Growth and Lower Operating Expenses to Positively Impact Future Profitability
MASFIN is anticipated to witness AUM and Loan growth of 24.9% and 26.5% CAGR, respectively, over FY26–28E, driven by its stronger focus on SME and Wheels Loan portfolio. The company remains focussed to drive operational efficiency by controlling growth in operational expenses. It has added only one branch in last year, whereas its Cost-to-AUM declined sequentially by 5 bps to 2.90% in Q1FY27.
We have increased our NII estimate by +7.0%/ +2.4% for FY27E/FY28E, respectively, as we bake in higher on-book AUM growth. Moreover, improvement in operating leverage is forecast to lead to higher profitability, driving change in our PAT estimate by +9.1%/4.3% for FY27E/FY28E, respectively. We now estimate the annualised RoAA to remain at 3.3% / 3.4% over FY27E/ FY28E, respectively.
View and Valuation:
We revise our FY27E/FY28E PAT estimate by +9.1% / +4.3%, respectively, led by higher NII and lower operating expenses on account of improvement in operating leverage. We value MASFIN on its standalone lending business, at 2.0x FY28E ABV, indicating a 27.5% upside from the current level. We retain our ‘BUY’ rating on the stock. The stock currently trades at 1.8x/1.6x P/ABV of its FY27E/FY28E estimate
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SEBI Registration no.: INZ 000160131
