Espirito Santo: SKS Microfinance (Buy, FV240):
SKS Microfinance reported its numbers, another very strong quarter with the loan book increasing by 17% on QoQ basis and profits moving up c.30% on QoQ basis. The portfolio showed no signs of stress, we think that the company is moving in the right direction. Key highlights of the results are:
a) Loan book growth remained very strong with the loan book growing by 17% on QoQ basis and 58% on YoY basis the company on track to meet its guidance of 2800-3000cr (40%-50% up on YoY basis) of portfolio for FY14. The company disbursed 1400 crores in Q3 almost 80% up on YoY basis.
b) Credit quality was really strong with the company showing almost 100% collection efficiency in its Non AP portfolio.
c) Operating leverage starting to play out with the loan book growing but opex remaining at 60crores per quarter.
Our 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 c.40% loan book growth in FY14 and c.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 c.75 crores for the year.
Antique Stock Broking: 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