Motilal Oswal: MAS Financial Services Outlines Sharp Improvement In Collection Efficiency; Cautious On Growth
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Motilal Oswal Report
MAS Financial Services Ltd. posted Q1 FY21 profit after tax of Rs 356 million (7% miss). While net interest income was largely in-line, lower-than-expected operational expenses (35% below estimate) resulted in a 10% beat in pre-provision operating profit (Rs 775 million).
Lower operational expenses was due to a tweak in the employee cost structure toward a variable structure. The entire provisioning in Q1 FY21 (Rs 299 million versus estimate of Rs 200 million) was toward contingent provisions for Covid-19. It stands at 1.6% of balance sheet loans.
June and July collections (in value terms) stood at 74% and 87% (versus 45–50% over April–May 2020).
Overall earnings and balance sheet growth are largely in line with expectations. We maintain our estimates for FY21/FY22E and expect return on asset and return on equity at approximately 3.8% and 16.4%.
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