SKS Microfinance Initiating Coverage Report By Emkay

Post the AP crisis, SKS Microfinance (SKSMF) has evolved stronger and is poised to gain from structural opportunity in an underpenetrated microfinance industry (MFI). With low political risk and regulatory harness, we expect SKSMF (leader in MFI) to deliver superior AUM CAGR of 40%, maintain asset quality and more than double the EPS over FY15-18E. Additionally, SKSMF is better placed to receive a small bank license. We estimate that sustainable RoEs (over the medium term) under the banking ambit to remain superior in the range of 20-24%, similar to our expectation for NBFCMFI model. Based on our probability weighted residual income model, we value the company at Rs580 per share (implied FY17PBV of 4.7x).

SKS Microfinance Initiating Coverage