KTBST Raises TIDLOR’s Target Price to ฿57 on Estimated Interest Rate Spread Rises

KTBST has a positive view of TIDLOR’s loan growth outlook and the bancassurance business in 2021-22, maintaining a “BUY” rating but raised a target price to 57.00 baht.

02/07/2021

KTBST Securities (KTBST) maintains a “BUY” rating on Ngern Tid Lor Public Company Limited (TIDLOR) but raised a target price to 57.00 baht per share from 48.00 baht, while maintaining 2022E PBV multiples at 5.0x, as we roll forward our valuation to 2022E base.

KTBST has a positive view of the company’s loan growth outlook and the bancassurance business in 2021E/2022E. First, interest rate spread is predicted to increase to 14.7%/14.9% as i) loan yield is expected to improve once the moratorium program ends, ii) the cost of funds will decrease given higher credit rating, iii) the company has a plan to tap low-rate funds from financial institutions, and iv) the impact from a potential cut of interest rate charges by 1-2% appears limited.

Second, total loans are projected to expand by 20-22% YoY as the number of Tidlorcards is expected to surge in 2H21E, apart from economic recovery. Last, revenue from the bancassurance business is forecasted to grow +25%/23% YoY in expectation of higher car insurances after the domestic vehicle sales rose +12% YoY in 5M21.

KTBST maintains 2021E/2022E net profit forecast at 3.29 billion baht (+36% YoY)/4.1 billion baht (+25%) in expectation of higher loan growth amid lower NPLs and credit cost. In 2Q21E, we forecast net profit to grow YoY, QoQ in light of stronger demand for loans, higher loan yield and lower cost to income.

TIDLOR’s stock price fell 5% over the past month, underperforming the SET Index by 3%. KTBST expects the stock to become an outperformer as 1) EPS is projected to grow 28% CAGR in 2021-23E given the company’s lending ecosystem after a huge investment in its IT infrastructure, and 2) the company has a well diversified revenue portfolio from the lending and bancassurance businesses.