X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Capital First: Conservative on provisioning - Views on News from Equitymaster
The India Letter
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Capital First: Conservative on provisioning
Aug 10, 2015

Capital First announced its results for the first quarter of financial year 2015-16 (1QFY16). The institution grew its income from operations by 18% YoY and the profits by 58% YoY during 1QFY16. Here is the detailed analysis of the results.

Performance summary
  • Income from operations grew 18% YoY in 1QFY16 with a healthy 20% YoY growth in loan book. Consequently, the net interest income grew by robust 39% YoY.
  • Net interest margins moved marginally lower from 8.9% in 1QFY15 to 8.8% in 1QFY16.
  • While the gross and net NPAs remained stable, a change in the company's provisioning policy for mortgages led to the steep rise in provision costs. According to us given the company's exposure to loans against property, this is a good and proactive move by the management.
  • Having raised Rs 3 bn of equity capital through a QIP issue in FY15 and with capital adequacy in excess of 20%, the company is well capitalized for growth.

Consolidated financials
Rs (m) 1QFY15 1QFY16 Change
Income from operations 3,047 3,589 17.8%
Interest Expense 1,895 1,986 4.8%
Net Interest Income 1,152 1,603 39.1%
Net interest margin (%) 8.9% 8.8%  
Other Income 290 394 35.9%
Other Expense 905 983 8.6%
Provisions and contingencies 212 508 139.6%
Profit before tax 325 506 55.7%
Tax 116 175 50.9%
Profit after tax/ (loss) 209 331 58.4%
Net profit margin (%) 6.9% 9.2%  
No. of shares (m)   90.9  
Book value per share (Rs)   177.0  
P/BV (x)*   2.3  
*Book value as on 30th June 2015

What has driven performance in 1QFY16?
  • Capital First reported strong growth in the SME and retail finance segments in 1QFY16. The company has consistently increased the share of retail and SME financing from 10% in FY10 to 85.2% in 1QFY16. Since there are about 29 m SMEs in India employing about 69 m people, the opportunities in SME and retail segment remain huge.

  • The NBFC's unique focus on the underpenetrated segment of non-salaried borrowers has helped it grow the loan well above sector average. The high growth in loan book filtered into net interest income and net profits as well. The number of customers financed from inception till March 2015 crossed 1.1 million.

  • The operating expenses continue to fall (down to 49% in 1QFY16 from 74% in FY14) even as the company intends to expand its network and asset base.CFL had employee base of 1,070 at the end of March 2015.

  • While the gross and net NPAs remained stable, a change in the company's provisioning policy for mortgages led to the steep rise in provision costs. According to us given the company's exposure to loans against property, this is good and proactive move by the management.

  • Having raised Rs 3 bn of equity capital through a QIP issue in FY15 and with capital adequacy in excess of 20% the company is well capitalized for growth.
What to expect?
At the current price of Rs 403, the stock is valued at 2.2 times our estimated FY17 adjusted book value.

As we have said in the past, companies that qualify for the Megatrend opportunity will see a meaningful improvement in their fundamentals over a period of time. It is encouraging to see that Capital First is managing to achieve above average loan growth along with quality of earnings and assets.

We had recommended investors to invest around 50% of the amount they intended to invest in the stock, when we recommended it in December 2014.The stock has already gone up by 29% since then. We would recommend investors to wait before buying more of the stock at relatively attractive valuations (closer to the Best Buy price).

To Read the Full Story, Subscribe or Sign In



DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes.

DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.

GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:
For the terms and conditions for research reports click here.

DETAILS OF ASSOCIATES:
Details of Associates are available here.

DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report
  2. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company.
  3. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
  4. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
  3. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  4. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
GENERAL DISCLOSURES:
  1. The Research Analyst has not served as an officer, director or employee of the subject company.
  2. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
  1. Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
  2. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price.
  3. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
  4. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service.
Feedback:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

CAPITAL FIRST SHARE PRICE


Dec 15, 2017 (Close)

TRACK CAPITAL FIRST

  • Track your investment in CAPITAL FIRST with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

CAPITAL FIRST - DEWAN H.FIN. COMPARISON

COMPARE CAPITAL FIRST WITH

MARKET STATS