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SKS Microfinance Ltd Q3FY14 results had clocked a 31 % improvement in earnings. Following the announcement brokerages Esprito Santo and Antique Stock broking have raised share price rating to 'buy'.
Espirito Santo on SKS Microfinance (Buy, FV240):
VIEW: We have been buyers of the stock with a valuation of Rs.240 given that we expect the company to more than double its profitability between FY14E and FY15E, given that we expect the company to show 40% loan book growth in FY14 and 40% loan book growth in FY15. We think that the company is on track to achieve the management guidance of 2800-3000 crores of loan book and our PAT expectation of 75 crores for the year.
Antique Stock Broking on SKS Microfinance - Embarking on the growth path (BUY)
After a long period of consolidation, SKS Microfinance is back on the growth path with it AUMs (ex-Andhra) growing 17% sequentially to Rs 23.6 bn as on quarter ended December 2013. Given the back-ended nature of growth as well as securitization in Q3FY14, NII declined 3% QoQ to Rs 573 mn. The company maintained a tight leash on operating costs with no increase in branch network as well as employee count, thus enabling stable costs despite the strong growth. Recoveries at ~Rs 50 mn were strong (possibly from Andhra Pradesh) and aided 31% sequential improvement in earnings to INR214m. Borrowing environment remained benign as the company securitized ~Rs 3.5 bn over Q3FY14.
Stable regulatory environment, overhauled processes and reduced competitive fervor have improved the risk perception of MFI sector over past few quarters. Funding environment continues to improve and disbursement CAGR of 36% will drive AUM CAGR of 36% over FY14-16E. Operating leverage benefits will continue to accrue as growth accelerates propelling earnings CAGR of 76% over FY14-16E.
We maintain BUY with twelve month price target of Rs 228/share, which implies an upside of 34%. We value the core business at Rs 199/ share (8.5x FY16e earnings) and the DTA at Rs 29/share. Another Andhra Pradesh like event remains the key risk, which gets completely mitigate once the MFI Bill 2012 get passed.
SKS Microfinance Ltd Q3FY14 results had clocked a 31 % improvement in earnings. Following the announcement brokerages Esprito Santo and Antique Stock broking have raised share price rating to 'buy'.
Espirito Santo on SKS Microfinance (Buy, FV240):
VIEW: We have been buyers of the stock with a valuation of Rs.240 given that we expect the company to more than double its profitability between FY14E and FY15E, given that we expect the company to show 40% loan book growth in FY14 and 40% loan book growth in FY15. We think that the company is on track to achieve the management guidance of 2800-3000 crores of loan book and our PAT expectation of 75 crores for the year.
Antique Stock Broking on SKS Microfinance - Embarking on the growth path (BUY)
After a long period of consolidation, SKS Microfinance is back on the growth path with it AUMs (ex-Andhra) growing 17% sequentially to Rs 23.6 bn as on quarter ended December 2013. Given the back-ended nature of growth as well as securitization in Q3FY14, NII declined 3% QoQ to Rs 573 mn. The company maintained a tight leash on operating costs with no increase in branch network as well as employee count, thus enabling stable costs despite the strong growth. Recoveries at ~Rs 50 mn were strong (possibly from Andhra Pradesh) and aided 31% sequential improvement in earnings to INR214m. Borrowing environment remained benign as the company securitized ~Rs 3.5 bn over Q3FY14.
Stable regulatory environment, overhauled processes and reduced competitive fervor have improved the risk perception of MFI sector over past few quarters. Funding environment continues to improve and disbursement CAGR of 36% will drive AUM CAGR of 36% over FY14-16E. Operating leverage benefits will continue to accrue as growth accelerates propelling earnings CAGR of 76% over FY14-16E.
We maintain BUY with twelve month price target of Rs 228/share, which implies an upside of 34%. We value the core business at Rs 199/ share (8.5x FY16e earnings) and the DTA at Rs 29/share. Another Andhra Pradesh like event remains the key risk, which gets completely mitigate once the MFI Bill 2012 get passed.
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