As the macro environment turns favorable and rejection rates decline, MAS will look to accelerate growth over H2. The ramp-up of the direct distribution channel will be a key growth enabler, facilitating strong growth at better yields, which would offset the impact of higher Opex. A meaningful repricing of borrowings should drive NIMs higher.
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Axis Securities Report
We reiterate our Buy recommendation on Mas Financial Services Ltd. The stock currently trades at 1.7x FY27E BV, and we value the stock at 2.1x FY27E BV to arrive at a target price of Rs 380/share, implying an upside of 25% from the current market price.
MAS remains well-positioned to deliver a strong AUM growth driven by a strong distribution network and adequate capitalisation. We factor in improved growth and better margins, driving better net interest income of 1-2% over FY27-28E, though we cut our FY26 NII estimates, factoring in slower growth and pressure on net interest margins (calc.) in H1.
Scaling up of the direct distribution should keep Opex ratios higher. Receding asset quality concerns should result in credit costs gravitating to normalized levels of 1.5-1.6% over the medium term.
We trim our earnings estimates by ~2% factoring in higher Opex and marginally higher credit costs. However, considering improving efficiency and normalized credit costs, we raise our Eps estimates by 2-3% over FY27-28E.
We expect MAS to deliver a strong 23/24/25% CAGR growth in AUM/NII/earnings over FY26-28E.
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