Axis Securities - Pick of the Week - MAS Financial Services

Axis Securities: Pick of the Week - MAS Financial Services

1. MAS Financial Services Ltd.
Banking -NBFC
Pick of the Week
25
th
May, 2024
Buy
Target Price
321
About the Company
MASFinancialServicesLtd.(MAS)isadiversifiedfinancialservicesproviderfocusedonlow-incomegroupsand
economicallyweakerindividualsoperatingsmallbusinesses,aswellasSMEshavinglimitedaccesstoformalfinancing
channels.Thecompanyoperatesthrough189branchesacross12statesandUnionterritories.MASalsocarriesoutits
businessthroughapan-Indianetworkof182NBFCpartnerswhichcontributeto~33%ofbusinesssourcing.
InvestmentRationale
A.Eyeing2xAUMinthenext3years:MAS’managementhasreiterateditsaspirationofdoublingtheAUMoverthenext3-4years(a
loangrowthCAGRof20-25%),supportedbydemand-ledgrowthandascaled-updistributionnetwork.Asthecompanypushesfor
thenextlegofgrowth,itwilllooktodiversifyitsAUMmix.WhilethecoreMSMEandWheelsproductswillcontinuetodrivehealthy
growth,MASwilllooktoforayintoUsedCars(currentlyinthepilotphase)andSupplyChainFinancing(asasubsetofMSMEloans
forNewandExistingcustomers).Intermsofthesalariedpersonalloans,MASwillcapitsmixat10%ofoverallAUM.Additionally,
MASexpectstoscaleupthehousingfinanceportfoliomeaningfully(aimingtogrowat30-35%CAGRoverthemediumterm),
therebyincreasingitscontributionto~10-15%intheconsolidatedAUM.WeexpectMAStodeliverahealthy~24%CAGRAUM
growthoverFY24-26E.
B.Strengtheningdirectdistribution:Eyeingfastergrowth,MASwillcontinuetoexpanditsdirectdistributionnetworkbyadding20-
30branchesinthenext6-9months.Themanagementexpectstheshareofdirectdistributiontoimproveto70-75%overthe
mediumtermvs~67%asofMar’24.Thecompanywillalsolooktofurtherstrengthenitsgeographicalpresencetoreduceits
dependenceontheTop-4states.WhilethecoregeographiesintheWest(mainlyGujaratandMaharashtra)haveimmensegrowth
potential,havingpre-emptedthegrowthpotentialinDelhiNCR,TamilNadu,KarnatakaandTelangana,MASplanstoforayinto
thesegeographiestokick-startitsnextlegofgrowth.Overthemediumterm,MASexpectsthenewergeographiestocontribute
meaningfullyinitsendeavourtodoubleAUMoverthemediumterm.
C.RecentratingupgradetoaidCoF:Recently,MAS'screditratingwasupgradedtoAA-(Stable)fromA+(Positive)byCARE.This
ratingsupgradewillaidCoFimprovementby15-25bpsoverthenext6-9months.Giventhatalargerchunkofthecompany’s
borrowingsareMCLRlinked,thecompanywillnegotiaterateswithitslenderssupportedbytheupgrade.ThiswillalsoenableMAS
totapborrowingsinthecapitalmarket.
D.Recommendation:WerecommendaBUYratingonthestockwithaTPofRs321/share,implyinganupsideof10%fromtheCMP.
CMP
(Rs)
Target
(Rs)
Potential
Upside
(%)
292 321 10%
MARKET DATA
No. of Shares 16.4 Cr
Market Cap 4,786 Cr
52-week High / Low388/241
BSE Code 540749
NSE Code MASFIN
Source: Axis Securities; CMP as on 24
th
May, 2024; **Adjusted for Bonus issue
FinancialSummary
WhyMASFinancialServicesLtd.?
StrongGrowthOpportunities
DirectDistributiontoaidfaster
growth
StableNIMsandstablecredit
coststooffsetOpexpressures
enablingdeliveryofstrongRoA
Assetqualitytoremainstable
Y/E NII PPOP PAT EPS ABV P/ABV RoA NNPA
Mar (Rs Cr) (Rs Cr) (Rs Cr) (Rs) (Rs) (x) (%) (%)
FY23 332 318 201 12.3** 84.3 3.2 2.9 1.5
FY24 408 421 248 15.1 100.4 2.7 3.0 1.5
FY25E 530 533 313 19.1 115.9 2.3 3.1 1.5
FY26E 658 657 385 23.5 133.8 2.0 3.1 1.5
Duration: 6-9 Months

2. Disclosures:
ThefollowingDisclosuresarebeingmadeincompliancewiththeSEBIResearchAnalystRegulations2014(hereinafterreferredtoastheRegulations).
1.AxisSecuritiesLtd.(ASL)isaSEBIRegisteredResearchAnalysthavingregistrationno.INH000000297.ASL,theResearchEntity(RE)asdefinedintheRegulations,isengagedinthebusinessofprovidingStockbrokingservices,
Depositoryparticipantservices&distributionofvariousfinancialproducts.ASLisasubsidiarycompanyofAxisBankLtd.AxisBankLtd.isalistedpubliccompanyandoneofIndia’slargestprivatesectorbankandhasitsvarious
subsidiariesengagedinbusinessesofAssetmanagement,NBFC,MerchantBanking,Trusteeship,VentureCapital,StockBroking,thedetailsinrespectofwhichareavailableonwww.axisbank.com.
2.ASLisregisteredwiththeSecurities&ExchangeBoardofIndia(SEBI)foritsstockbroking&DepositoryparticipantbusinessactivitiesandwiththeAssociationofMutualFundsofIndia(AMFI)fordistributionoffinancialproductsand
alsoregisteredwithIRDAasacorporateagentforinsurancebusinessactivity.
3.ASLhasnomaterialadversedisciplinaryhistoryasonthedateofpublicationofthisreport.
4.I/We,authors(Researchteam)andthename/ssubscribedtothisreport,herebycertifythatalloftheviewsexpressedinthisresearchreportaccuratelyreflectmy/ourviewsaboutthesubjectissuer(s)orsecurities.I/We(Research
Analyst)alsocertifythatnopartofmy/ourcompensationwas,is,orwillbedirectlyorindirectlyrelatedtothespecificrecommendation(s)orview(s)inthisreport.I/weormy/ourrelativeorASLoritsAssociatedoesnothaveany
financialinterestinthesubjectcompany.AlsoI/weormy/ourrelativeorASLoritsAssociatesmayhavebeneficialownershipof1%ormoreinthesubjectcompanyattheendofthemonthimmediatelyprecedingthedateof
publicationoftheResearchReport.SinceassociatesofASLareengagedinvariousfinancialservicebusinesses,theymighthavefinancialinterestsorbeneficialownershipinvariouscompaniesincludingthesubject
company/companiesmentionedinthisreport.I/weormy/ourrelativeorASLoritsassociatedoesnothaveanymaterialconflictofinterest.I/wehavenotservedasdirector/officer,employeeetc.inthesubjectcompanyinthelast
12-monthperiod.
5.ASLoritsAssociateshasnotreceivedanycompensationfromthesubjectcompanyinthepasttwelvemonths.I/WeorASLoritsAssociatehasnotbeenengagedinmarketmakingactivityforthesubjectcompany.
6.Inthelast12-monthperiodendingonthelastdayofthemonthimmediatelyprecedingthedateofpublicationofthisresearchreport,ASLoranyofitsassociatesmayhave:
i. Received compensation for investment banking, merchant banking or stock broking services or for any other services from the subject company of this research report and / or;
ii. Managed or co-managed public offering of the securities from the subject company of this research report and / or;
iii. Received compensation for products or services other than investment banking, merchant banking or stock broking servicesfrom the subject company of this research report;
ASLoranyofitsassociateshavenotreceivedcompensationorotherbenefitsfromthesubjectcompanyofthisresearchreportoranyotherthird-partyinconnectionwiththisreport.
Terms&Conditions:
ThisreporthasbeenpreparedbyASLandismeantforsoleusebytherecipientandnotforcirculation.Thereportandinformationcontainedhereinisstrictlyconfidentialandmaynotbealteredinanyway,transmittedto,copiedor
distributed,inpartorinwhole,toanyotherpersonortothemediaorreproducedinanyform,withoutpriorwrittenconsentofASL.Thereportisbasedonthefacts,figuresandinformationthatareconsideredtrue,correct,reliableand
accurate.Theintentofthisreportisnotrecommendatoryinnature.Theinformationisobtainedfrompubliclyavailablemediaorothersourcesbelievedtobereliable.Suchinformationhasnotbeenindependentlyverifiedandno
guaranty,representationofwarranty,expressorimplied,ismadeastoitsaccuracy,completenessorcorrectness.Allsuchinformationandopinionsaresubjecttochangewithoutnotice.Thereportispreparedsolelyforinformational
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Sr. No Name Designation E-mail
1 Neeraj Chadawar Head of Research [email protected]
2 PreeyamTolia Research Analyst [email protected]
3 OmkarTanksale Research Analyst [email protected]
4 UttamkumarSrimal Research Analyst [email protected]
5 AnkushMahajan Research Analyst [email protected]
6 DnyanadaVaidya Research Analyst [email protected]
7 Aditya Welekar Research Analyst [email protected]
8 PrathameshSawant Research Analyst [email protected]
9 AkshayMokashe Research Analyst [email protected]
10 EeshaShah Research Analyst [email protected]
11 Shikha Doshi Research Associate [email protected]
12 Shridhar Kallani Research Associate [email protected]
13 ShivaniMore Research Associate [email protected]
14 SuhaneeShome Research Associate [email protected]

3. Disclaimer:
Nothinginthisreportconstitutesinvestment,legal,accountingandtaxadviceorarepresentationthatanyinvestmentorstrategyissuitableorappropriatetotherecipient’sspecificcircumstances.The
securitiesandstrategiesdiscussedandopinionsexpressed,ifany,inthisreportmaynotbesuitableforallinvestors,whomustmaketheirowninvestmentdecisions,basedontheirowninvestment
objectives,financialpositionsandneedsofspecificrecipient.
Thisreportmaynotbetakeninsubstitutionfortheexerciseofindependentjudgmentbyanyrecipient.Eachrecipientofthisreportshouldmakesuchinvestigationsasitdeemsnecessarytoarriveatan
independentevaluationofaninvestmentinthesecuritiesofcompaniesreferredtointhisreport(includingthemeritsandrisksinvolved),andshouldconsultitsownadvisorstodeterminethemeritsand
risksofsuchaninvestment.Certaintransactions,includingthoseinvolvingfutures,optionsandotherderivativesaswellasnon-investmentgradesecuritiesinvolvesubstantialriskandarenotsuitablefor
allinvestors.ASL,itsdirectors,analystsoremployeesdonottakeanyresponsibility,financialorotherwise,ofthelossesorthedamagessustainedduetotheinvestmentsmadeoranyactiontakenon
basisofthisreport,includingbutnotrestrictedto,fluctuationinthepricesofsharesandbonds,changesinthecurrencyrates,diminutionintheNAVs,reductioninthedividendorincome,etc.Past
performanceisnotnecessarilyaguidetofutureperformance.Investorsareadvicenecessarilyaguidetofutureperformance.InvestorsareadvisedtoseeRiskDisclosureDocumenttounderstandthe
risksassociatedbeforeinvestinginthesecuritiesmarkets.Actualresultsmaydiffermateriallyfromthosesetforthinprojections.Forward-lookingstatementsarenotpredictionsandmaybesubjectto
changewithoutnotice.
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engagedinanyothertransactioninvolvingsuchsecuritiesorearnbrokerageorothercompensationoractasamarketmakerinthefinancialinstrumentsofthecompany(ies)discussedhereinoractasan
advisororinvestmentbanker,lender/borrowertosuchcompany(ies)ormayhaveanyotherpotentialconflictofinterestswithrespecttoanyrecommendationandotherrelatedinformationandopinions.
Eachoftheseentitiesfunctionsasaseparate,distinctandindependentofeachother.Therecipientshouldtakethisintoaccountbeforeinterpretingthisdocument.TheResearchreportsarealsoavailable
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hereinmayormaynotbeeligibleforsaleinalljurisdictionsortocertaincategoryofinvestors.
TheDisclosuresofInterestStatementincorporatedinthisdocumentisprovidedsolelytoenhancethetransparencyandshouldnotbetreatedasendorsementoftheviewsexpressedinthereport.The
Companyreservestherighttomakemodificationsandalternationstothisdocumentasmayberequiredfromtimetotimewithoutanypriornotice.Theviewsexpressedarethoseoftheanalyst(s)andthe
Companymayormaynotsubscribetoalltheviewsexpressedtherein.CopyrightinthisdocumentvestswithAxisSecuritiesLimited.
Copyright in this document vests with Axis Securities Limited.
Axis Securities Limited, SEBI Single Reg. No.-NSE, BSE & MSEI –INZ000161633, ARN No. 64610, CDSL-IN-DP-CDSL-693-2013, SEBI-Research Analyst Reg. No. INH 000000297, SEBI Portfolio
Manager Reg. No.-INP000000654, Main/Dealing off.-Axis Securities Ltd, Unit No.1001, 10th Floor, Level-6, Q2 Building, Aurum, QParc, Plot No. 4/1, TTC, Thane –BelapurRoad, Ghansoli, Navi
Mumbai. –400 710., Regd. off.-Axis House,8th Floor, WadiaInternational Centre, PandurangBudhkarMarg, Worli, Mumbai –400 025.
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