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Buy MAS Financial Services, target price Rs 632: Motilal Oswal

According to the brokerage, this company has one of the best capitalisations amongst NBFCs with Tier I of ~29 per cent.

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Last Updated: Jun 05, 2020, 09.45 AM IST
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Motilal Oswal has given a buy rating to MAS Financial Services with a target price of Rs 632.

MAS Financial reported Q4 FY20 PAT at Rs 357 million (69 per cent beat). Pre-provision operating profit or PPoP was flat year on year and missed brokerage estimates by 8 per cent. Lower - than - expected Covid-19 provisions at Rs 203 million, against brokerage estimate of Rs 300 million led to the strong beat. For FY20, PPoP grew 11 per cent year on year, in line with AUM growth. While PBT was flat year on year at Rs 2.3 billion, decline in the tax rate led to 17 per cent year on year growth in PAT to Rs 1.8 billion. Net income was up 5 per cent year on year and declined 10 per cent quarter on quarter to Rs 1.04 billion (7 per cent miss).

Investment Rationale

MAS Financial operates in a tough operating environment with large exposure to micro loans and the MSME sector. Thus, asset quality and business growth are the key monitorables, according to the brokerage. Historically, the company has managed liquidity well with higher sell-downs, which was reflected in the fourth quarter FY20 earnings as well. According to the brokerage, this company has one of the best capitalisations amongst NBFCs with Tier I of ~29 per cent.

Financials

For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 182.41 crore, down -5.87 per cent from last quarter sales of Rs 193.78 crore and up 10.73 per cent from last year's same quarter sales of Rs 164.72 crore. The company reported net profit after tax of Rs 35.71 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 73.58 per cent stake in the company as of March 31, 2020, while FIIs held 1.53 per cent, DIIs 10.74 per cent and public and others 14.15 per cent.
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