Magma Fincorp Limited -524000 FV ( Rs 2) : Value pick at CMP of Rs 97.5 1 year Target Rs 130

Magma Fincorp Limited  is a non-deposit taking non-banking finance company (NBFC), registered with the Reserve Bank of India (RBI) as an Asset Finance Company. The Company, having started operations over two decades back, Magma provides a bouquet of financial products including financing of Utility Vehicles & Cars, Commercial Vehicles, Construction Equipment, Used Commercial Vehicles, Tractors and SME Loans. It also operates in Affordable Housing Finance and General Insurance segments. Magma has a dedicated base of around 5 lakhs active customers and manages a Loan book of Rs 17796 crores. The company has 257 branches in 22 states having employee strength of around 9000 .

Financials	2016	2015	2014	2013	2012
Revenue(Crs)	2,109.64	2,018.78	1,846.78	1,510.95	975.37
Other Income	29.52	27.18	28.89	95.2	40.65
Total Income	2,139.16	2,045.95	1,875.67	1,606.15	1,016.02
Expenditure	-835.75	-774.89	-608.97	-502.89	-305.85
Interest	-998.09	-1,061.44	-1,055.16	-887.4	-598.52
PBDT	305.32	209.62	211.54	215.86	111.65
Depreciation	-39.34	-34.52	-33.14	-36.7	-29.58
PBT	265.97	175.11	178.4	179.16	82.08
Tax	-78.82	-26.04	-42.82	-56.36	-18.83
Net Profit	187.15	149.07	135.57	122.8	63.24
Equity	47.37	38.09	38.02	37.99	37.95
EPS	7.84	7.22	6.47	5.75	2.97
CEPS	9.56	9.64	8.87	8.4	4.89
OPM %	61.78	62.96	68.59	73.02	72.81
NPM %	8.87	7.38	7.34	8.13	6.48
Dividend%	40%	40%	40%	40%	30%
Book Value(FV-Rs-2)	66.71
Price Book	1.55
P/E	13
M.Cap(19-8-2016)	2443 crores

Investment positives:

1.       Consistent profit and dividend making company for last 5 years.

2.       Book value of 66.71 with price to book value of 1.55

3.       Good net profit margins.

4.       NBF sector is set to grow with improvement in economic sentiment and performance.

5.       Good monsoon and growing SME segment should help to increase loan portfolio.

6.       Low PE multiples of 12 offers good value opportunity to invest at current levels.

7.       Company is going through restructuring with change in leadership and restructuring in management team and positive business conditions, company is expected to improve overall performance and reduce NPAs .

8.       It could be a potential takeover candidate as well due to lower promoter holding

Negatives: Growing NPAs .Gross NPA stands at 8.7%.

Target Price:

Expected EPS of 10 for 16-17 and PE multiple of 13 would give a target price of Rs 130 with potential of 30% increase from current levels of 97-98.