The company’s first quarter results witnessed some softness in asset quality in NBFC but was likely less-than-feared by investors, Morgan Stanley said.
The consolidated profit after tax (PAT) in the June quarter beat Morgan Stanley’s estimates by 4%, led by beats of 2% in the lending businesses and 8% in asset management company (AMC), the brokerage said.It said AB Capital is one of the few stocks it sees at a reasonable starting point of valuation with scope for upgrades and gradual valuation re-rating.
AB Capital reported a 10% increase in its consolidated net profit in the June quarter at ₹835 crore and a 9.6% increase in its revenue at ₹9,502.6 crore from the previous year.
Its total lending portfolio stood at ₹1.66 lakh crore, a 30% increase from the previous year and a 5% sequential rise.The company in its concall said its NBFC business is on track to achieve a return on assets (RoA) between 2% and 2.2% for the next eight quarters, which is in-line with its guidance.
The margins should start improving due to a mix of personal loan rising and cost of funds easing, the company said.
There is some stress in small ticket unsecured small and medium enterprises (SME), which is 1.3% of its book, but the credit cost guidance is of 1.3%, the management said in the earnings call. It is now beginning to see the operating leverage play out, it added.
For the Aditya Birla Sun Life business, the value of new business (VNB) growth was at 27% from the previous year despite the annualised premium equivalent (APE) growth being 10%. The company’s management expects margins to improve and doubling VNB during FY25-28.
All 10 analysts that have coverage on the stock have a “buy” rating on it.
AB Capital shares ended the previous session 11.3% up. It has gained 56.3% this year, so far.
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