Spandana Sphoorty Financial Ltd has seen its shares tumbling 41 per cent year-to-date, with the weak June quarter results triggering the fresh bout of selloff on the counter. The NBFC missed the consensus earnings estimate by 35 per cent due to a sharper-than-expected rise in credit cost. High attrition of branch managers in five states, particularly MP, was a concern and so were high credit cost and non performing loans. While analysts cut their earnings estimates for NBFC steeply post Q1 results, they cited inexpensive valuations for their continued 'Buy' ratings on the stock.
"While we slash our earnings estimate by 25 per cent for FY25 and 12 per cent for FY26, factoring in higher credit costs, we maintain Buy due to Spandana’s inexpensive valuation of 1 time on FY26E PBV. We revise our target price to Rs 950 from Rs 1,200, as we cut our target multiple to 1.5 times against 1.8 times earlier," ICICI Securities said.
The scrip closed at Rs 670.65 on Monday.
Spandana Sphoorty Financial's collections for the quarter fell 94 per cent against 96.5 per cent QoQ due to election-led operational challenges, heat wave and higher attrition in states such as Madhya Pradesh, Maharashtra, Rajasthan, Telangana and Gujarat that impaired timely customer service.
The management highlighted that it has already initiated several measures to improve asset quality, but a weak Q1FY25 would likely have an impact on full year AUM growth and credit cost. It lowered FY25 guidance for AUM growth to 17-18 per cent against 25 per cent earlier and increased its credit cost guidance to 3.75 per cent from 2.5 per cent earlier.
"The senior management team of Spandana has its task cut out for the next couple of quarters. However, it has a capable senior management team, which has seen multiple such periods of asset quality stress in the past. While there will be transitory pain, we believe Spandana will navigate these challenges and come out stronger," MOFSL said.
This brokerage expects Spandana to deliver FY26 RoA and RoE of 4.3 per cent and 16 per cent, respectively. It maintained 'Buy' with a target price of Rs 830, based on 1.2 times FY26E BV.
Nuvama has cut its FY25 and FY25 EPS estimates sharply for Spandana Sphoorty Financial and suggested a revised target price of Rs 900 per share.
The core operating performance remained strong but elevated provisions marred earnings, ICICI Securities said.