Edelweiss Profitability Shrinks, Asset Quality Worsens
Mumbai: Edelweiss Financial Services has been witnessing slow growth and pressure on margins, however, current quarter performance raises concerns over asset quality as well, Emkay Global said on Wednesday.
Emkay reasoned that the company’s loan book dipped year-on-year as well as a sequential basis to Rs 411 billion as consolidation in the loan book continued amid tight liquidity and headwinds in the developer finance segment.
Edelweiss Financial Services’ total revenues were down 10.1 per cent year-on-year and 6.8 per cent quarter-on-quarter to Rs 24.1 billion during the September quarter.
Besides, its gross non-performing assets (NPA) deteriorated sequentially to 2.7 per cent from 2.3 per cent in Q1 FY20, while net NPA inched up to 1.7 per cent from 1.2 per cent last quarter.
“Operating profit was down 20.8 per cent y-o-y and 6 per cent q-o-q to Rs 13.1 billion. PAT, post adjusting for minority interest, declined by 81.2 per cent y-o-y to Rs 512 million due to the compression in NIMs and a sharp rise in provisions,” Emkay said.
“The stock trades at 1.2x FY21E BV. We currently have a Hold rating on the stock with a target price of Rs 135,” Emkay said.
Shares of Edelweiss Financial Services on the BSE were trading at Rs 122.10 apiece.