Ambit Capital maintains buy on Magma Fincorp, lowers target price to Rs 59

Ambit Capital has maintained buy rating on Magma Fincorp in the long term and lowered target price to Rs 59 from Rs 68. Shares of Magma Fincorp ended down 5.4% at Rs 46.6 on Friday while the BSE sensex closed 330.13 points down at 40,323.61.'

Company Financials

For the quarter ended 30-09-2019, the company has reported consolidated sales of Rs 662.79 crore, up 4.99% from last quarter sales of Rs 631.27 crore and up 6.17% from last year same quarter sales of Rs 624.29 crore. The company has reported net profit after tax of Rs 26.50 crore in latest quarter.


Investment Rationale

Poor track record of execution, deteriorating asset quality and lack of pricing power expose Magma to vagaries of market liquidity crunch, said Ambit. Shrinking margin profile with poor levers around growth would continue to keep RoA/ RoE muted. But Magma’s seasoned retail book doesn’t warrant deep discount valuation to 3-year rolling crosscycle average.