Pick of The Week: Axis Sec Is Bullish On This High Promoter Holding Stock

A small cap NBFC offering a variety of financial services is MAS Financial Services Ltd. (MAS). As the leading housing finance firm in India and a retail financing organisation, the company offers financial services for Micro Enterprise Loans, SME Loans, Home Loans, Two Wheeler Loans, Used Car Loans, and Commercial Vehicle Loans. The brokerage firm Axis Securities has suggested to buy MAS Financial Services as a pick of the week stock with a target price of Rs 843 which implies a potential upside of 9% from the current market price. The brokerage firm has highlighted 3 key triggers as investment rationale for investors.

AUM Likely To Clock 20-25% CAGR In FY24

"Given the ease in scaling up the business through the direct distribution network, MAS will look to increase its branch network in core and new geographies to 175 in FY24 from 149 branches in FY23. The management expects the contribution of direct distribution to the overall network to improve to ~70% over the medium term vs. 62% currently. With ample growth opportunities, focus on the MSME segment, and improving branch productivity, MAS expects to clock a healthy AUM growth of 20-25% CAGR on a steady state basis," according to Axis Sec.

"It also eyes a near-term milestone of clocking an exit AUM of Rs 10,000 Cr in FY24. The management remains confident that the housing opportunity remains large and expects the housing finance book to grow at 30-35% in FY24 and reach an AUM of Rs 1,000 Cr over the next 2 years. Along with the ramp-up of direct distribution channels, MAS' fintech/co-lending partnerships will also incrementally contribute to growth," the brokerage said.

Asset Quality Likely To Remain Stable

"MAS's cautious lending approach, strong underwriting practices, and willingness to sacrifice growth in situations where asset quality may be compromised have helped it maintain its asset quality even during testing times of COVID-19 and despite the RBI circular on asset quality recognition. The new segments are currently behaving well and the company will continue to closely monitor the movement in the portfolio. The management expects to maintain GNPA/NNPA at 225-275bps/150-200bps on a steady-state basis. With no major challenges on asset quality, credit costs are expected to be at 100bps in FY24," said Axis Securities in a note.

Healthy RoA/RoE Expected In FY24/25E

"Given that a large part of MAS' borrowings is linked with MCLR, the interest rate hikes reflect in CoF, albeit with a lag. The management believes that MAS will be able to contain its CoF at ~9.5% by leveraging the company's ability to anticipate funding requirements, having adequate sanctions on hand, and borrowing from diversified sources. With certain repricing opportunities available on the lending yields, MAS expects to maintain NIMs between 6.75%-7% over the medium term. Thus, stable NIMs and benign credit costs should offset the pressure on cost ratios owing to a shift towards direct sourcing. Hence, we expect MAS to continue delivering a healthy RoA/RoE of 3-3.1%/16-18% over FY24/25E," said Axis Securities.

MAS Financial Services Share Price Target

"We recommend a BUY rating on the stock with a TP of Rs 843, implying an upside of 10% from CMP," said the research analysts of Axis Securities.

While writing this copy, the shares of MAS Financial Services were trading at Rs 774.95. The stock made a 52-week-high of Rs 938.25 on (07/11/2022) and a 52-week-low of Rs 516.60 on (26/07/2022).

During Q1FY24, the company reported promoter shareholding of 73.72%, FIIs stake of 1.59%, DIIs stake of 10.58% and public stake of 14.10%. The promoter shareholding of MAS Financial Services at the current level is much higher than its peers such as Bajaj Finance, Bajaj Finserv, Cholamandalam Investment & Finance Company, Bajaj Holdings, SBI Cards, Shriram Finance and HDFC AMC, as per the data of Screener.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.