SBFC Finance - Margin Expansion Drive Outperformance: Systematix

Systematix Research Report

SBFC Finance Ltd. Q3 FY24 operational performance was healthy and ahead of consensus estimates driven by margin expansion (40 basis points QoQ) and strong assets under management growth (40% YoY, 8% QoQ). net interest income/operating profit came in at Rs 1.5 billion / Rs 980 million (versus consensus estimate of Rs 1444 million / Rs 866 million) registering a growth of 62% YoY/ 56% YoY.

Net interest margins increased 40 bps QoQ, driven by higher yields on account of change in ticket size. Opex increased 46% YoY and 7% QoQ resulting in Opex to AUM at 5.4% (steady QoQ).

Despite higher provisions during the quarter (up 12% QoQ), PAT at Rs 640 million registered a growth of 63% YoY (versus consensus estimate of Rs 545 million). AUM growth was strong, led by 21% YoY (2% QoQ) growth in disbursements.

In terms of asset quality, gross stage-III /net stage-III asset ratio was steady at 2.4% / 1.4%, while one plus days past due increased from 5.3% in Q2 to 5.6% in Q3.

Collection efficiency broadly remained stable at ~97.5%. The management has maintained its AUM growth guidance of 5-7% QoQ driven by geographical expansion.

At current market price, SBFC Finance is trading at 2.8 times FY26 book value (consensus), we believe, strategy to focus on pan India expansion to aid sustained healthy business growth.

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