BUY CMP 212.10 Target Price 242.00 MUTHOOT CAPITAL SERVICES LTD. Result Update (PARENT BASIS): Q2 FY15 DECEMBER 6 th 2014 ISIN: INE296G01013 Index Details Stock Data Sector FINANCE (NBFC) BSE Code 511766 Face Value 10.00 52wk. High / Low (Rs.) 275.70/73.00 Volume (2wk. Avg. Q.) 6938 Market Cap (Rs. in mn.) 2644.89 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY14A FY15E FY16E Net Sales 1582.30 1969.96 2352.14 EBITDA 948.20 1168.60 1381.46 Net Profit 222.10 235.86 257.14 EPS 17.81 18.91 20.62 P/E 11.91 11.21 10.29 Shareholding Pattern (%) 1 Year Comparative Graph MUTHOOT CAPITAL SERVICES LTD S&P BSE SENSEX SYNOPSIS Muthoot Capital Services Limited, offers fund and non fund based financial services to retail, corporate and institutional customers through the wide network of branches of Muthoot Fincorp Ltd. The company s net sales registered 24.53% y-o-y growth in 2 nd quarter of FY15 and stood at Rs. 465.50 million compared to Rs. 373.80 million over the corresponding quarter last year. In 2 nd quarter of FY15, Net profit Jumps to 5.07% y-o-y of Rs. 53.90 million against Rs. 51.30 million over prior period of Last year. Profit before tax (PBT) stood at Rs. 81.60 million in Q2 FY15. For Q2 FY15, EBITDA is at Rs. 276.50 million against Rs. 228.20 million in the corresponding quarter of the previous year. For half year end of FY15, the company registered a growth of 26.88% in Net sales to Rs. 914.80 million from Rs. 721.00 million for half year ended of FY14. The outlook for the Company is linked to the demand for automobiles especially two wheelers, purchased on credit, as its main focus is on two wheeler finance. Net Sales and PAT of the company are expected to grow at a CAGR of 30% and 6% over 2013 to 2016E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Muthoot Capital Services Ltd 212.10 2644.89 17.81 11.91 2.23 45.00 Sundaram Finance Ltd 1287.20 143036.10 41.06 31.35 5.95 100.00 M&M Fin. Services Ltd 320.25 182147.00 14.71 21.77 3.58 190.00 Capri Global Capital Ltd 203.00 7116.00 25.90 7.84 0.75 15.00
QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q2 FY15, Muthoot Capital Services Limited, is a part of Muthoot Pappachan Group, has reported its financial results for the quarter ended 30 th Sept, 2014. Rs. In million Sep-14 Sep-13 % Change Net Sales 465.50 373.80 24.53 PAT 53.90 51.30 5.07 EPS 4.32 4.11 5.07 EBITDA 276.50 228.20 21.17 The company has achieved a turnover of Rs. 465.50 million for the 2 nd quarter of the financial year 2014-15 as against Rs. 373.80 million in the corresponding quarter of the previous year. The company net profit Jumps to Rs. 53.90 million against Rs. 51.30 million over prior period of Last year. For Q2 FY15, EBITDA is at Rs. 276.50 million against Rs. 228.20 million in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 4.32 for the 2 nd quarter as against an EPS of Rs. 4.11 in the corresponding quarter of the previous year. Break up of Expenditure: During the quarter, Total expenditure increased mainly on account of Employee benefits Expenses by 13%, Administrative & Other expenditure 31% and Provisions by 233% are the main attribute for the growth of expenditure, when compared to corresponding quarter of previous year. Total Expenditure in Q2 FY15 stood at Rs. 193.70 million, rose by 26 per cent as compared to Rs. 153.50 million in Q2 FY14. Break up of Expenditure (Values in million) Q2 FY15 Q2 FY14 Employee Benefit Expenses 95.90 84.80 Depreciation & Amortization Expense Administrative & Other Expenses 2.00 1.80 82.50 62.90 Provisions 13.30 4.00
COMPANY PROFILE Muthoot Capital Services Ltd (MCSL) has established in 1994, the Company offers fund and non fund based financial services to retail, corporate and institutional customers through the wide network of branches of Muthoot Fincorp Ltd. Its portfolio includes commercial and consumer finance products like vehicle loans, gold loans, loans against property, bonds, deposits, investment products and advisory services among others. Apart from these, the company also disburses loans against property, shares, gold ETF s, SME loans, mortgage loans, leasing & hire purchase loans and bill discounting. MCSL promoted by the Muthoot Pappachan Group is a Non Banking Finance Company (NBFC) registered with the Reserve Bank of India and listed on the Bombay Stock Exchange. In the year 2013-14, the company plans to Disburse Rs. 7540.00 millions for financing automobiles and also plans to enter in to tractor finance business and also to expand the business of used car finance on all India basis. The company has framed various schemes like chequeless scheme, 100% funding scheme, 1% interest scheme etc. to cater to the choice of the customers. The exemplary services rendered by company have helped it to be a financer of choice among the customers. The company recognises greater growth in the year to come. The company is planning to tap the huge potential available by adding new products and expanding its operations in the northern part of the country too.
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March31, 2013-2016E 2013A 2014A 2015E 2016E I. EQUITY AND LIABILITIES: A) Shareholders Funds: a) Share Capital 124.73 124.73 124.73 124.73 b) Reserves and Surplus 904.34 1060.73 1296.66 1553.79 Sub-Total Net worth 1029.07 1185.46 1421.39 1678.52 B) Non-Current Liabilities: a) Long-term borrowings 97.54 703.73 858.55 1030.26 b) Other Long -Term Liabilities 15.25 20.32 26.42 33.28 Sub-Total Long term liabilities 112.79 724.05 884.97 1063.54 Current Liabilities: C) a) Short-term borrowings 3319.84 4391.92 5094.63 5807.88 b) Other Current Liabilities 219.72 740.46 1081.07 1513.50 c) Short Term Provisions 79.23 106.97 84.51 76.06 Sub-Total Current Liabilities 3618.79 5239.35 6260.21 7397.43 TOTAL EQUITY AND LIABILITIES (A + B + C) 4760.65 7148.86 8566.56 10139.50 II. ASSETS: D) Non-Current Assets: a) Fixed Assets 19.76 28.35 36.86 46.07 b) Long term receivables from financing activities 2062.99 2660.38 3032.83 3439.23 c) Deferred tax assets 9.98 13.24 18.27 24.85 d) Non Current Investments 0.02 68.51 141.13 232.87 e) Long Term Loans and Advances 8.79 8.04 9.00 9.91 Sub-Total Non Current Assets 2101.54 2778.52 3238.09 3752.92 E) Current Assets: a) Current Investments 2.03 2.21 2.70 3.26 b) Cash and Bank Balances 9.23 82.39 105.46 133.93 c) Receivables from financing activities 2569.28 4245.76 5110.59 6081.60 d) Short Term Loans and Advances 6.49 15.66 22.71 32.47 e) Other Current Assets 72.08 24.32 87.02 135.31 Sub-Total Current Assets 2659.11 4370.34 5328.47 6386.57 TOTAL ASSETS (D + E) 4760.65 7148.86 8566.56 10139.50
Annual Profit & Loss Statement for the period of 2013 to 2016E Value(Rs. mn) FY13A FY14A FY15E FY16E Description 12m 12m 12m 12m Net Sales 1066.40 1582.30 1969.96 2352.14 Other Income 5.80 5.30 9.28 12.52 Total Income 1072.20 1587.60 1979.24 2364.66 Expenditure -381.00-639.40-810.64-983.19 Operating Profit 691.20 948.20 1168.60 1381.46 Interest -363.20-604.40-809.90-992.12 Gross profit 328.00 343.80 358.70 389.34 Depreciation -5.30-7.90-8.77-10.08 Profit Before Tax 322.70 335.90 349.93 379.26 Tax -105.10-113.80-114.08-122.12 Net Profit 217.60 222.10 235.86 257.14 Equity capital 124.70 124.70 124.70 124.70 Reserves 904.30 1060.80 1296.66 1553.79 Face value 10.00 10.00 10.00 10.00 EPS 17.45 17.81 18.91 20.62 Quarterly Profit & Loss Statement for the period of 31 MAR, 2014 to 31 DEC, 2014E Value(Rs. mn) 31-Mar-14 30-Jun-14 30-Sep-14 31-Dec-14E Description 3m 3m 3m 3m Net sales 454.10 449.30 465.50 500.18 Other income 0.90 2.70 2.70 2.51 Total Income 455.00 452.00 468.20 502.69 Expenditure -187.70-176.50-191.70-213.58 Operating profit 267.30 275.50 276.50 289.11 Interest -179.70-192.10-192.90-204.47 Gross profit 87.60 83.40 83.60 84.64 Depreciation -2.20-1.80-2.00-2.20 Profit Before Tax 85.40 81.60 81.60 82.44 Tax -25.80-27.50-27.70-26.42 Net Profit 59.60 54.10 53.90 56.02 Equity capital 124.70 124.70 124.70 124.70 Face value 10.00 10.00 10.00 10.00 EPS 4.78 4.34 4.32 4.49
Ratio Analysis Particulars FY13A FY14A FY15E FY16E EPS (Rs.) 17.45 17.81 18.91 20.62 EBITDA Margin (%) 64.82 59.93 59.32 58.73 PBT Margin (%) 30.26 21.23 17.76 16.12 PAT Margin (%) 20.41 14.04 11.97 10.93 P/E Ratio (x) 12.15 11.91 11.21 10.29 ROE (%) 21.15 18.73 16.59 15.32 ROCE (%) 15.66 15.22 15.97 16.34 Debt Equity Ratio 3.32 4.30 4.19 4.07 EV/EBITDA (x) 8.75 8.08 7.27 6.77 Book Value (Rs.) 82.52 95.07 113.98 134.60 P/BV 2.57 2.23 1.86 1.58 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs. 212.10, the stock P/E ratio is at 11.21 x FY15E and 10.29 x FY16E respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.18.91 and Rs.20.62 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 30% and 6% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 7.27 x for FY15E and 6.77 x for FY16E. Price to Book Value of the stock is expected to be at 1.86 x and 1.58 x respectively for FY15E and FY16E. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs.242.00 for Medium to Long term investment. INDUSTRY OVERVIEW Indian Economy With a lower than 5% growth in the GDP, 2013-2014 performance is the lowest in more than a decade. The uneven political climate leading to non-decision making environment, led to stagnant economical scenario thereby leading to lower infusion of investments in to infrastructure and core industries leading to lower capital expenditure and lower job creation. The inflation remained on the higher side, thereby reducing the disposable income and leading to lower consumer spends. This coupled with adverse financial position in various sectors that led to cutting of jobs etc further worsened the situation. The Banking system in India continued to grapple with rising delinquencies and higher scrutiny from the regulators. The process for new licenses was set into the motion, with the onset of the new Governor. To counter inflation, while rates were increased, it led to reduction of funds available for disbursement, which led to increase finance costs. This led to the core industries and the infrastructure sectors witnessed lower level of activity, thereby bringing up various negatives attached to lower growth and development. Outlook for the industry NBFCs play a vital role in the financial sector of our economy along with other financial institutions. Over the years, due to their strategic management practices, refined operational techniques and extended presence throughout the country, especially the rural and semi-urban locations coupled with lower costs of delivery, lower restrictions on customers etc have led to it being an alternate choice and at times the first choice for several customers, who need financing. While the RBI has made regulations stringent for the NBFCs, it has also
recognized the utility of the NBFCs and thereby made them eligible to set up Banks and also act as an extension of Banks, where the Banks cannot reach. Due to the increase in finance space by NBFCs, the RBI s surveillance has increased. Through its various regulatory measures NBFCs are brought under stricter supervisory regime of RBI. While several steps are being taken to increase the role that the NBFCs play, norms are being strengthened to ensure that there is a strong, transparent and robust non banking financial sector. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.
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