Centrum Broking: Sundaram Finance Logs In-Line Q1 Performance, Asset Quality Intact
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Centrum Broking Report
Sundaram Finance Ltd.’s earnings were largely in-line. Net interest income at Rs 3.8 billion came in as expected though drop in fee income led to a miss on pre-provision operating profit.
Healthy net interest margin trajectory was intact with incremental funding cost trending downwards. Assets under management declined by 1.3% YoY as disbursements saw a steep drop though repayments were higher which was a positive.
Disbursements and collection efficiency are picking up. Asset quality was contained sequentially though Covid-19 provisions were Rs 1.1 billion taking the total Covid-19 reserve to Rs 1.37 billion (appropriation of profits).
Average moratorium is 55% - though moratorium one to two saw a drop from approximately 65% to approximately 45%. We see return on assets/return on equity scale up to 2.2%/13.6% in FY22E
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