Kfin Technologies shares gain nearly 5% as high costs drag Q1 profitability, Ascent acquisition weighs
The company’s recent acquisition of Ascent also continues to prove to be a drag on its margins.
For the June quarter, Kfin Tech reported a 2.6% sequential growth in its topline to ₹356.5 crore. This was driven by a 7% uptick in its international business.
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for the quarter saw a decline of 5% from the previous quarter to ₹122 crore. The decline was due to higher costs, which impacted the operating performance.
EBITDA margin for the quarter stood at 34.22%, compared to 37% in the previous quarter. Excluding the Ascent acquisition, Kfin Tech’s EBITDA margin would’ve been 240 basis points higher sequentially at 39.4%.
Its adjusted profit after tax (PAT) took a hit as well as it fell 7.3% sequentially. to ₹75.2 crore.
KFin Tech’s average assets under management (AUM) growth was in-line with industry, as it increased 1.9% from the previous quarter to ₹27.3 lakh crore.
Its equity AUM was up 3.6% sequentially, faster than the industry. Kfin Tech’s corporate clients increased 6.3% from last quarter to 11,375 clients.
Jefferies Remains Bullish On Kfin Tech
Brokerage firm Jefferies has a “buy” rating on Kfin Tech and a price target of ₹1,125 apiece, indicating an upside of 31% from its previous closing price of ₹859 apiece.
It said the company’s EBITDA came in 6% above the brokerage’s estimates and was led by better-than-expected topline in issuer registrar and transfer agent (RTA) and international segments.
Its mutual fund RTA yield of 3.19 bps was in-line with Jefferies’ estimates, but was sequentially lower due to higher share of ETF AUM, it said.
Ascent’s revenue grew by 32% from last year, winning 18 new funds during the quarter. Ascent’s EBITDA margin stood at 6.3% in the the June quarter.
Jefferies said its PAT was 2% above its estimates due to lower other income.
Stock reaction
Of the 20 analysts who have coverage on the stock, 17 have a “buy” rating and three have a “hold” rating. No analyst tracking the stock has a “sell” recommendation on it.
Shares of Kfin Technologies were trading 5.6% higher at ₹897 apiece at 9.30 am on Monday. The stock has declined 16.7% this year, so far.
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