India NBFC Q2 Results Preview - Steady Quarter; Margin Compression To Continue: Systematix

Systematix Research Report

Non-banking financial companies within our coverage universe are likely to report stable performance on most counts except slight moderation in assets under management growth and continued compression in net interest margins.

While AUM for coverage companies is likely to grow by a healthy 20% YoY (versus 22% YoY in Q1), NIMs are likely to see 5-20 bps compression on account of continued rise in cost of funds.

Overall, AUM growth is expected to remain in the range of 19-34% across product categories like vehicle, housing, gold and SME/consumer segments. AUM of gold financiers under our coverage (ex-IIFL) should benefit from higher gold prices and market share gains.

Asset quality remains largely steady with credit cost in-line with Q1 levels.

Home First Finance (Buy), Muthoot Finance (Buy) and Shriram Finance (Buy) are our top picks within our coverage universe.

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