KTC - Good operations priced in (TP Bt320.0, NEUTRAL)
(19/04/2018 - 09:30)
กลุ่มอุตสาหกรรม เงินทุนและหลักทรัพย์
หุ้น KTC
มูลค่าพื้นฐาน 320.00
คำแนะนำ HOLD
  • 1Q18 profit jumped 65% yoy and 29% qoq to Bt1.2bn driven by decent bad debt recovery and lower provisions  
  • Raised FY18F/19F earnings by 12% on stronger NIM and lower credit cost; need lower provisions under IFRS9
  • NEUTRAL, raised TP to Bt320, implying 17.5x FY18F P/E and 5.2x P/BV; strong operations has been priced in

 

Strong 1Q18 earnings supported by lower credit cost

KTC reported Bt1.2bn net profit for 1Q18, up 65% yoy amid strong bad debt recovery and lower credit cost. Loans grew 6% yoy driven by credit card loans (+5% yoy) and personal loans (+10%), but fell 5% qoq on seasonality effect. Credit card spending grew 8.4% in 1Q18 vs 9.9% for the industry in 2M18. NIM fell 60bp qoq to 15.6% in 1Q18 on lower interest rate charged for credit card. Non-NII grew 12% yoy driven by decent bad debt recovery (+31% yoy). On the cost side, OPEX rose at a slower pace than revenue, at 8% yoy as KTC controlled staff and marketing costs. Hence, cost-to-income ratio fell to 35.4% vs 36.2% in 1Q17. Asset quality remained strong due to efficient debt collection. KTC booked Bt1.4bn provision (7.8% credit cost), down 14% yoy and qoq due to slower loan growth. NPL ratio was stable qoq at 1.34% while NPL coverage increased to 593% from 588% in 4Q17.

 

Raised FY18-19F EPS to reflect better NIM and lower provisions

KTC is maintaining its financial targets for FY18: 10% loan growth and 15% card spending growth. We expect loan and card spending to rebound from 2Q after the bank starts to rein in loss-making promotion campaigns. We revised up FY18F/19F net profit by 12% after imputing higher NIM (on lower funding cost), non-NII growth (strong bad debt recovery) and lower credit cost (details on Pg. 2) to reflect better-than-expected 1Q18 results. Note that KTC will rollover Bt7bn debentures at a lower rate in August. After fine-tuning assumptions, FY18F/19F earnings are projected to grow 41%/21% yoy.

 

NEUTRAL, raised TP to Bt320 (from Bt270)

Following the earnings upgrade, we revised up TP to Bt320 from Bt270. The solid earnings outlook and superior asset quality has been priced in as the share price has outperformed the market by 76% YTD and 129% in the past year. Key risks are slower-than-expected card spending and weaker asset quality.