MAS Financial Q2 Review - Inline Earnings Aided By NIM Expansion Despite Higher Credit Costs: Motilal Oswal

Motilal Oswal Report

MAS Financial Services Ltd. Q2 FY24 profit after tax grew 22% YoY to Rs 600 million (in line). Net total income was up 28% YoY at Rs 1.5 billion (in line), while opex at Rs 484 million grew 16% YoY. Pre-provision operating profit rose 34% YoY to Rs 1.04 billion (in line).

Operating expenses increased, with the cost/income ratio growing ~75 basis points QoQ to ~32% and the opex-to-assets under management ratio rising ~15 bp to 2.2%.

MAS Financial Services' expenses were mainly driven by the expansion in direct distribution.

Credit costs surged 95% YoY stood to Rs 236 million versus our estimate of Rs 190 million.

On-book gross non-performing assets rose ~5 bp QoQ to 2.17%. However,  net non-performing assets ratio was stable QOQ at 1.47%. Capital adequacy and liquidity on the balance sheet remained healthy.

We cut our FY25E earning per share by ~5% to factor in higher credit costs, driven by an improving mix of direct distribution.

Retain 'Buy' with a revised target price of Rs 1100 (based on 2.8 times September 25E book ).

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