I had written my first report on SKS Microfinance Ltd about 7 months back. Here is the link to that report: http://stockslogic.blogspot.in/2015/03/sks-microfinance-limited-successful.html
The company has continued it's smart recovery in business performance. SKS Microfinance Ltd's T-T-M Total Income has now increased to Rs.917 crores by June'15, which is 55% higher Y-o-Y. The company's T-T-M Net Profit has reached Rs.199.50 crores, which is 74% higher Y-o-Y, despite the fact that the company has paid an Income Tax of Rs.24 crores during the last 2 quarters after it's Tax adjustment eligibility against past losses seems to be getting over. The company's PBT figure was higher by over 95% Y-o-Y. Thanks to the Tax being paid from the recent 2 quarters, the Y-o-Y growth for Net Profit might seem lower for the next 2-3 quarters, than the numbers reported earlier. After that things will normalise. Have a look at the charts below:
With every passing quarter, SKS Microfinance is spreading it's reach at a steady pace. Focus is clearly on expanding it's business outside of Andhra Pradesh. In order to maintain tight check on quality of it's loan portfolio, the company is strictly disbursing loans only for Income-generating activities. Odisha & Karnataka continue to be the Top-2 states contributing to SKS's business, with Maharashtra, Bihar & West Bengal next in line. The company has a presence in total of 16 states with no state, other than Odisha or Karnataka, contributing to more than 15% to it's Loan portfolio. SKS Microfinance has seen a 25% Y-o-Y increase in it's Average Loan Size in Q1-FY'16 to over Rs.13,300/-. This is extremely positive from the margin point of view. With increasing business scale, the Cost-to-Income ratio is showing a marked improvement with every passing quarter. The Average Quarterly Disbursement, which was around Rs.1200 crores a year ago, has jumped to about Rs.2400 crores over the last 2 quarters.
Coming to stock performance, it had hit a multi-year high of around Rs.580/- in the last week of July'15. Since then the stock of SKS Microfinance Ltd has seen it's first major correction. The stock has corrected to levels of about Rs.380 by the last week of September'15.
This correction has given an opportunity to long term investors who were looking to invest in SKS Microfinance at decent valuations. At the current price of around Rs.425/-, SKS Microfinance Ltd trades at a P/E ratio of about 26-27 times it's T-T-M EPS. Considering the company's current growth momentum and the potential of future growth continuity, these valuations aren't expensive. Infact it can be termed as attractive. The company's Total Income could very well double from current level of little over Rs.900 crores to around Rs.1800 crores in the next 4 to 6 quarters. The Net Profit may not grow at the same pace as Total Income, but still will post very good growth to ensure that current valuations to look cheap in the long term.
The company has continued it's smart recovery in business performance. SKS Microfinance Ltd's T-T-M Total Income has now increased to Rs.917 crores by June'15, which is 55% higher Y-o-Y. The company's T-T-M Net Profit has reached Rs.199.50 crores, which is 74% higher Y-o-Y, despite the fact that the company has paid an Income Tax of Rs.24 crores during the last 2 quarters after it's Tax adjustment eligibility against past losses seems to be getting over. The company's PBT figure was higher by over 95% Y-o-Y. Thanks to the Tax being paid from the recent 2 quarters, the Y-o-Y growth for Net Profit might seem lower for the next 2-3 quarters, than the numbers reported earlier. After that things will normalise. Have a look at the charts below:
With every passing quarter, SKS Microfinance is spreading it's reach at a steady pace. Focus is clearly on expanding it's business outside of Andhra Pradesh. In order to maintain tight check on quality of it's loan portfolio, the company is strictly disbursing loans only for Income-generating activities. Odisha & Karnataka continue to be the Top-2 states contributing to SKS's business, with Maharashtra, Bihar & West Bengal next in line. The company has a presence in total of 16 states with no state, other than Odisha or Karnataka, contributing to more than 15% to it's Loan portfolio. SKS Microfinance has seen a 25% Y-o-Y increase in it's Average Loan Size in Q1-FY'16 to over Rs.13,300/-. This is extremely positive from the margin point of view. With increasing business scale, the Cost-to-Income ratio is showing a marked improvement with every passing quarter. The Average Quarterly Disbursement, which was around Rs.1200 crores a year ago, has jumped to about Rs.2400 crores over the last 2 quarters.
Coming to stock performance, it had hit a multi-year high of around Rs.580/- in the last week of July'15. Since then the stock of SKS Microfinance Ltd has seen it's first major correction. The stock has corrected to levels of about Rs.380 by the last week of September'15.
This correction has given an opportunity to long term investors who were looking to invest in SKS Microfinance at decent valuations. At the current price of around Rs.425/-, SKS Microfinance Ltd trades at a P/E ratio of about 26-27 times it's T-T-M EPS. Considering the company's current growth momentum and the potential of future growth continuity, these valuations aren't expensive. Infact it can be termed as attractive. The company's Total Income could very well double from current level of little over Rs.900 crores to around Rs.1800 crores in the next 4 to 6 quarters. The Net Profit may not grow at the same pace as Total Income, but still will post very good growth to ensure that current valuations to look cheap in the long term.
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