TIDLOR’s Strong Loan Growth Leads to 54% Upside to Target Price by CGS-CIMB

CGS-CIMB Securities maintains its outlook on Ngern Tid Lor Public Company Limited (SET: TIDLOR) after the announcement of its 2Q23 results as net profit was in line with the expectations, boosted by high loan growth.

TIDLOR reported a net profit of Baht 927.2 million, indicating a 5.5% (YoY) decrease from Baht 981.4 million at the same period of the previous year. This decline can partly be attributed in part to an elevated provision that aligns with the ongoing expansion of the total loan portfolio.

CGS-CIMB noted that it sees continued operating leverage for TIDLOR, on the back of a lower cost-to-income ratio of 55.3% in 2Q23 (vs. 56.4% for FY22). Overall operational metrics for TIDLOR remained strong, in its view, on the back of: 1) high loan growth of 23.5% yoy in 2Q23, 7.4% YTD (in line with expectations) and 2) in-line strong fee income from insurance brokerage in 2Q23 (+24% yoy).

The brokerage firm believed the strong yield expansion is partly due to the utilisation of TIDLOR’s revolving cash cards (0.58m cards, 61% of customer base as of 2Q23), which normally generate higher yields compared to its other products.

All in all, CHS-CIMB maintained an ‘Add’ rating on TIDLOR and THB34.25 target price (+54% upside), based on FY23F P/BV of 3.0x (ROE: 17%, COE: 11%). The firm still preferred TIDLOR to SAWAD and MTC, given TIDLOR’s strong net profit CAGR of 22% (FY23-25F) and relatively stronger balance sheet (lower NPL ratio and higher NPL coverage). Re-rating catalysts are strong business growth and higher operating leverage from its digital platform. Downside risks include regulatory risks (e.g. price ceilings), higher competition from price wars, and further deterioration in asset quality.