Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

NBFCs Q3FY21 Results Preview - Micro headwinds > Macro tailwinds - HDFC Securities

Posted On: 2021-01-19 05:10:07 (Time Zone: Arizona, USA)

Ms. Krishnan ASV, Institutional Research Analyst, HDFC Securities

Our coverage universe is likely to clock a 3.4/1.9% sequential growth in NII/PPOP. As with banks, GS-III will be of little relevance in light of the SC stay and the focus will be on pro forma metrics. On a sequential basis, NBFCs (including HFCs) are likely to see margins reflate on the back of a fall in funding costs and lower drag from excess liquidity buffers. Disbursals are likely to rise materially, on a QoQ basis, as underlying asset sales revive in line with economic activity.

We have raised our FY22/23E earnings estimates across our coverage by 12.0/13.1%, as we forecast a sustained improvement in metrics around growth, credit losses and margins. However, we also remain sanguine of the imminent reforms in the regulatory, supervisory and governance architecture of large NBFCs (and HFCs).

We upgrade CREDAG to BUY (target price of Rs 851) on the back of stable rural macros and an easier funding environment, which is likely to help restore the company to pre-COVID-19 growth levels earlier than previously anticipated. Despite lofty valuations, we maintain BUY on CIFC (target price Rs 486) and ADD on BAF (target price Rs 4,745) due to improving visibility on growth and RoE metrics.

GS-II a key monitorable; collections to improve: As with banks, reported GS-III for NBFCs could remain stable or decline on account of the impact of the recent SC stay on NPA marking. In light of this, pro forma numbers will assume greater relevance. Investors should watch for the movement within GS-II to assess potential inflows into GS-III. NBFCs are likely to report a sustained improvement in collection efficiencies, except for select segments (school buses, taxis and HCVs).

Provisions to remain elevated: Despite most asset financiers in our coverage universe having built significant provision buffers and the expected improvement in collections, we continue to conservatively model for elevated provisions in 2HFY21. With the exception of BAF (-13.3%), we expect a significant rise in provisions sequentially (~2x).

Improving disbursal momentum: Asset and home financiers will have benefited from rising sales in underlying assets. Consequently, NBFCs within our coverage universe are likely to register a significant sequential uptick in disbursals (closing in on pre-COVID-19 levels).

Falling CoF to buoy margins: (1) Reduction in CoF (11bps QoQ blended across our coverage) driven by the re-pricing of the liabilities side and benign interest rates and (2) reduction in liquidity buffers with increase in business volumes, are likely to drive margin expansion, at least on a sequential basis across most of our coverage companies. This holds true particularly for large players with fixed rate books within our coverage such as BAF and CIFC.

Regulatory headwinds ahead: In recent times, the RBI has hinted at introducing reforms in the regulatory, supervisory and governance architecture for large NBFCs (and HFCs) to enhance the stability of the broader financial system. We believe such structural measures aimed at strengthening the financial system would usually entail a period of consolidation and short-term dislocation in ROA metrics.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

4th Industrial Conclave - Bullish undertone, favourable valuation - HDFC Securities

Sanofi India - Weak quarter; sequential improvement - ICICI Securities

Sunteck Realty - All eyes on upcoming launches - ICICI Securities

Company Update - Tata Motors - ICICI Direct

Q4CY20 Company Update - Mahindra CIE Automotive - ICICI Direct

Event Update - Hindalco - ICICI Direct

EY report launch at BioAsia 2021 - Moving the needle: Healthcare industry in a post-COVID world

Initiating Coverage - Dalmia Bharat Ltd - HDFC Securities Retail Research Desk

Initiating Coverage - Mastek Ltd - HDFC Securities Retail Research Desk

Hindalco Industries - Status quo maintained - ICICI Securities

Tata Motors - India business scaling in the right direction - ICICI Securities

IPO Review - Heranba Industries Ltd

Company Update - Narayana Hrudayalaya - ICICI Direct

Ambuja Cements - Market share sustenance key for rerating - ICICI Securities

ADD on Astral Poly Technik - An 'astr'onomical growth story - HDFC Securities

FMCG Sector Update Report - Divergence narrows; refocus on core - HDFC Securities

Maintain REDUCE on Jubilant FoodWorks - More legs for growth; reflecting confidence on core - HDFC Securities

Torrent Power - Growth acceleration - ICICI Securities

Mahindra CIE Automotive - CY20 performance closes on a strong note - ICICI Securities

Q3FY21 Company Update - V-Guard Industries - ICICI Direct

Quant Pick - Indus Towers - ICICI Direct

Q4CY20 Result Update - Ambuja Cement - ICICI Direct

Q3FY21 Company Update - Nesco Ltd - ICICI Direct

Maintain BUY on Ambuja Cements - Healthy quarter; multiple triggers ahead - HDFC Securities

Heranba Industries Ltd. - IPO - Sound Financials & Promising Outlook Augur Well

India Equity Strategy Report - Quarterly flipbook: Q3 - upgrades galore! - HDFC Securities

Earnings Wrap Q3FY21: Encouraging quarter, broad based recovery under way!

Shilpa Medicare - USFDA import alert at Jadcherla unit - ICICI Securities

Q3FY21 Company Update - Indian Bank - ICICI Direct

Quant Pick - Torrent Power - ICICI Direct

GE T&D India - Strong cashflow - ICICI Securities

Q3FY21 Result Update - Graphite India - ICICI Direct

Q4CY2020 Result Update - Varun Beverages - ICICI Direct

Q3FY21 Company Update - NBCC Ltd - ICICI Direct

Quant Pick - United Breweries - ICICI Direct

Q4CY2020 Result Update - Nestlé India - ICICI Direct

Q3FY21 Result Update - Time Technoplast - ICICI Direct

Healthy Business Performance Puts ITC Stock Recovery on Track

Gold - Feb 17, 2021 - Reliance Securities

Maintain REDUCE on Nestle India - Steady revenue show; employee cost dents margins - HDFC Securities

Varun Beverages - Q4 CY20 Result and Concall Update - YES Securities

Nestle India - Q4 CY20 Result Update - YES Securities

Reiterate BUY on JMC Projects - Some hits, some misses - HDFC Securities

Varun Beverages - Strong volumes; higher margins - ICICI Securities

Computer Age Management Services - Play on industry AUM growth - ICICI Securities

Nestle India - Just a tad underwhelming (given the high benchmarks expected from Nestle India) - ICICI Securities

NHPC - Earnings robust; projects on track - ICICI Securities

Maintain BUY on ITD Cementation - Gradual recovery shaping up - HDFC Securities

Techno Electric & Engineering - Strong margins, healthy growth outlook - ICICI Securities

Time Technoplast - Outlook upbeat; execution remains key - ICICI Securities

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020