EXECUTIVE SUMMARY
CONFIRMATION OF THE RECOVERY… , UPWARD REVISION OF THE STOCK TARGET PRICE
A confirmed recovery of "consumer loans" in Morocco
At the end of the 1st half of 2021, Eqdom confirms the recovery of its activity by recording a 48.0% increase in its loan production compared to H1-20 to MAD 1,279 Mn. This is a level almost similar to that observed pre-health crisis, i.e. around MAD 1,300 Mn.
It is reassuring to note that this recovery in activity is driven by the good momentum in the two pillars of the Moroccan consumer loan sector. On the one hand, the production of “automotive loans”, which jumped by 86.0%. On the other hand, “Personal loans” which grew by 28% over the same period.
Financial achievements limited by the weight of the cost of risk
In a context of economic recovery, the operator's consolidated NBI stood at MAD 276 Mn, up 10.4% compared to H1-20 and 1.3% compared to H1-19. The good control of general operating expenses allows the GOI margin to remain stable at 55%, in line with the average observed over the 2018-2020 period. The increase in the net cost of risk by MAD +36 Mn to MAD 115 Mn weighed on the earning power. To this end, the NIGS is almost similar to that of H1-20, i.e. MAD 20 Mn.
The achievements in terms of NBI and Gross Operating Income remain in line with our annual forecasts for 2021E through achievement rates of 51% and 48% respectively. Meanwhile, the low achievement rate of the NIGS does not call into question since we expect an acceleration in the normalization of the cost of risk during H2-21.
A revision of the stock target price from MAD 1,200 to MAD 1,650
Since our “BUY” recommendation » on September 14th, 2020, Eqdom stocks posted a performance of 39%, from MAD 990 to MAD 1,372. Taking into account the solid recovery in household consumption, the room for normalization of the cost of risk and the decrease in the stock’s discount rate, we raised our target price to MAD 1,650 against MAD 1,200 initially. This is an upside potential of 20% over the MT.
Beyond its positive outlook, the ability of Eqdom to return to its normative dividend at the end of the 2020R-2023E period would improve its attractiveness on the stock market. According to our scenario, the DPS would evolve from MAD 65 to MAD 80 during this period, i.e. an average D/Y of 5.6% against 2.8% for the Moroccan Equity market.
Read more.
