Magma Fincorp - Results first cut - ahead of our estimates - Ambit

Magma's 4QFY13 adjusted PAT was at Rs456mn, up 89% YoY and 20% QoQ (16% above our estimates), owing to higher-than-expected net interest income and other income. Magma continued its loan growth momentum, with on-book assets growing at 59% YoY. Loan loss provisioning increased 63% YoY. We would get more clarity on NIMs, credit costs, operational efficiency as further disclosures would be made available.

Where do we go from here? Whilst we would have more clarity on key metrics through additional disclosures and the analyst meet, our thesis hinges on anticipation of robust NII growth going forward, driven by the increasing share of interest earning assets in total AUM and expansion in margins as the rate cycle turns. Further, maintaining credit quality going forward along with ramping up the high-yield loans segment would remain key drivers for Magma's RoAs and RoEs to reach 2% and 15%, respectively, over the next couple of years. We maintain our BUY stance with a target price of Rs130/share (implied FY14 P/B of 1.6x and 48% upside) and await the analyst meet to get more colour on the company's strategy going forward.

Source : Equity Bulls

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