CRISIL Research Ier Report Magma Fincorp 2013 Q1FY14fc

8/12/2019 CRISIL Research Ier Report Magma Fincorp 2013 Q1FY14fc

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CRISIL IERIndependentEquityResearch

Enhancing investment decisions

Magma Fincorp Ltd

Q1FY14 Results First Cut


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Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making processAnalysis

of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a

five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a five-

point scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).

CRISILFundamental Grade Assessment

CRISILValuation Grade Assessment

5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)

4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)

3/5 Good fundamentals 3/5 Align (+-10% from CMP)

2/5 Moderate fundamentals 2/5 Downside (negative 10-25% from CMP)

1/5 Poor fundamentals 1/5 Strong downside (


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Magma Fincorp LtdQ1FY14 results first cut: Results below expectations

Fundamental Grade 3/5 (Good fundamentals)

Valuation Grade 4/5 (CMP has upside)

Industry Consumer finance

The above grades are outstanding ones and are currently under review

1

July 19, 2013

Fair Value 106

CMP 91

For detailed initiating coverage report please visit: www.ier.co.in

CRISIL Independent Equity Research reports are also available on Bloomberg (CRI ) and Thomson Reuters.

Magma Fincorp Ltds (Magma Fincorps) Q1FY14 consolidated earnings were below CRISIL

Researchs expectations. Highlights of the consolidated results are mentioned below . Our

outstanding fundamental grade is 3/5 and the fair value is 106. We may revise our

assessment post our discussion with the management.

Net interest income declined by 3% q-o-q to 2,032 mn. Other income decreased by 19%

q-o-q to 245 mn, resulting in 5% q-o-q dip in total operating income to 2,277 mn.

Operating expenses declined by 6% q-o-q led by 10% drop in staff costs and 5% drop in

brokerage and commissions.

Provision for NPAs and bad debt write-offs stood at 361 mn (down 1.2% q-o-q).

Net profit remained flat at 437 mn.

Valuations: Current market price has upside

CRISIL Research has assigned a P/B multiple of 1.2x to FY14E book value to arrive at the

fair value of 106 per share. At the current market price of 91, our valuation grade is 4/5.

KEY FORECAST

mn FY11 FY12 FY13# FY14E FY15E

Total operating income 5,217 4,375 7,752 10,933 14,017

Pre-provision profit 2,456 1,651 3,466 5,833 8,135

Adjusted net profit 1,201 740 1,382 2,411 3,377

EPS 9.3 3.9 7.3 10.2 14.3

P/E (x) 9.8 23.3 12.5 8.9 6.4

P/ABV (x) 2.0 1.6 1.5 1.2 1.1

RoE (%) 26.1 8.8 11.1 13.8 15.0RoA (%) 2.3 1.1 1.3 1.7 1.9

Provisions & write -offs ( as a % of loan book) 0.3 0.2 0.5 0.8 1.0

Capital adequacy ratio (%) 15.8 19.5 16.9 19.0 17.5

NM: Not meaningful; CMP: Current market price

# Based on abridged financials

Source: Company, CRISIL Research estimates

CFV MATRIX

KEY STOCK STATISTICSNIFTY/SENSEX 6082/19990

NSE/BSE tickerMAGMA /

MAGMAFIN

Face value ( per share) 2

Shares outstanding (mn) 190

Market cap (mn)/(US$ mn) 17,266/290

52-week range ()/(H/L) 110/59

Beta 0.8

Free float (%) 66%

Avg daily volumes (30-days) 298,365Avg daily value (30-days) (mn) 27.5

SHAREHOLDING PATTERN

PERFORMANCE VIS--VIS MARKET

Returns

1-m 3-m 6-m 12-m

MAGMA 4% 6% -8% 34%

NIFTY 4% 4% -0.4% 16%

ANALYTICAL CONTACTMohit Modi (Director) [email protected]

Onkar Kulkarni [email protected]

Vishal Rampuria [email protected]

Client servicing desk

+91 22 3342 3561 [email protected]

1 2 3 4 5

1

2

3

4

5

Valuation Grade

FundamentalGrade

Poor

Fundamentals

ExcellentFundamentals

Stron

g

Downs

ide

Stron

g

Upsid

e

33.7% 33.7% 33.7% 33.7%

42.7% 42.3% 43.6% 43.7%

13.7% 13.7% 12.5% 12.3%

10.0% 10.4% 10.3% 10.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sep -12 Dec-12 Mar-13 June-13

Promoter FII DII Others
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Magma Fincorp Ltd

3

Share price movement Fair value movement since initiation

-Indexed to 100

Source: NSE, CRISIL Research Source: NSE, BSE, CRISIL Research

-

20

40

60

80

100

120

140

160

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

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Apr-12

May-12

Jun-12

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Aug-12

Sep-12

Oct-12

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Jul-13

Magma NIFTY

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

0

20

40

60

80

100

120

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

Jan-13

Feb-13

Apr-13

May-13

Jun-13

Jul-13

('000)()

Total Traded Quantity (RHS) CRISIL Fair Value Magma


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4

Annexure: Consolidated Financials

# Based on abridged financials

Source: CRISIL Research

Ratios

( mn) FY11 FY12 FY13# ( mn) FY11 FY12 FY13#Net Interest Income 4,667 3,832 6,806 Spread Analysis

Non Interest Income 550 543 946 Yield on AUM 16.6% 15.1% 16.0%

Total Operating Income 5,217 4,375 7,752 Cost of borrow ings 8.5% 11.6% 10.9%

Operating Expenses 2,761 2,724 4,286 Net Interest Margin (NIM) 8.9% 5.4% 6.4%

Staff Costs 1,363 1,490 2,040 Return Ratios

Other Operating Expenses 1,397 1,234 2,246 ROA (%) 2.3% 1.1% 1.3%

Pre- provision profit (PPP) 2,456 1,651 3,466 ROE (%) 26.1% 8.8% 11.1%

Provision & Contingency 356 318 966 Growth ratios

Prof it be fore depreciat ion and tax 2,101 1,333 2,500 Loan assets - including off-book ( mn) 14.2% 29.0% 34.9%

Depreciation On Fixed Assets 279 296 376 Disbursements 33.2% 36.7% 39.9%

Extra-ordinary gain / (loss) - - - Net Interest Income 40.8% -17.9% 77.6%

PBT 1,822 1,037 2,125 Non Interest Income -17.3% -1.3% 74.2%

Provision for tax 601 259 675 Total Operating Income 31.1% -16.1% 77.2%

PAT 1,221 778 1,449 Operating Expenses 28.8% -1.3% 57.3%

Minority Interest (MI) 20 38 67 Staff Costs 29.4% 9.3% 36.9%

Report PAT after MI 1,201 740 1,382 Pre- provision profit (PPP) 33.7% -32.8% 109.9%

Extra-ordinary gain / (loss) - - - Provision & Contingency -12.0% -10.5% 203.4%

Adjusted PAT after MI 1,201 740 1,382 Adjusted Net Profit 71.5% -38.4% 86.8%

EPS () 43.9% -57.9% 86.8%

Balancesheet Book Value () 26.3% 16.8% 28.7%

( mn) FY11 FY12 FY13# Asset Quality

Total Share Capital 1,853 1,806 2,349 Gross NPA (%) 0.0% 0.0% 1.6%

Equity share capital 260 379 379 Net NPA (%) 0.0% 0.0% 1.3%

Equity Share w arrants 125 - - Provision & w riteoffs (as % of loan book) 0.3% 0.2% 0.5%

Reserves 5,396 10,578 13,594 Valuation Data

Shareholders Funds 5,781 10,958 13,974 P/E (x) 9.8 23.3 12.5

Minority Interest 98 188 255 P/ABV (x) 2.0 1.6 1.5

Preference capital 1,469 1,427 1,970 Key Parameter s

Borrow ings 46,361 61,840 108,373 Loan assets - including off-book ( mn) 93,367 120,400 162,400

Other Liabilities & Provisions 4,760 7,176 6,019 Disbursements ( mn) 54,148 74,040 103,610

Deferred tax liability 381 234 548 Capitalisation ratios (Adjusted)

Sources of funds 58,850 81,822 131,138 Capital adequacy ratio 15.8% 19.5% 16.9%

Tier I capital ratio 8.4% 12.4% 10.6%

Cash & Bank Balances 10,075 8,493 12,178 Tier II capital ratio 7.4% 7.1% 6.2%

Investments 114 0 2,669 Efficiency ratio

Net Loans and advances 46,358 69,895 111,242 Cost to Income ratio 58.3% 69.0% 60.1%

Net Fixed A ssets and Capital WIP 1,425 1,463 1,902 Opex/ average assets 5.8% 4.3% 4.4%

Deferred tax asset - - - Leverage (x) 8.0 5.6 7.8

Other Assets 877 1,971 3,146

Application of funds 58,850 81,822 131,138

( mn) Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14

FY11 FY12 FY13# Total operating income 1666 1756 1933 2398 2277

Adj EPS () 9.3 3.9 7.3 Change (q-o-q) 31% 5% 10% 24% -5%

Adj Book Value () 44.5 57.8 62.5 Adj. PAT 310 266 364 441 437

Dividend per share () 0.6 0.6 0.8 Change (q-o-q) 30% -14% 37% 21% -1%

Actual o/s shares - mn 129.8 189.7 189.7 EPS 1.6 1.4 1.9 2.3 2.3

Income Statement

Quarterly Financials

Per share


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CRISIL Research Ier Report Magma Fincorp 2013 Q1FY14fc