MTC - 3Q24: In line; trim TP on loan growth

In line with INVX and consensus forecast, 3Q24 results reflected stable NPL inflow with a hike in credit cost, slower loan growth, better NIM and easing cost to income ratio. We cut our 2024F by 2% and 2025F by 3% after lowering our loan growth forecast by 2 ppt. We maintain our Outperform rating with a trim in TP to Bt54 (based on 2.6x PBV or 16.5x PE for 2025F) from Bt56 as we expect good earnings growth to be sustainable at 19% in 2025, underpinned by decent loan growth, stable NIM and easing credit cost.

3Q24: In line. 3Q24 net profit rose 3% QoQ and 16% YoY to Bt1.49bn, in line with INVX and consensus forecasts.

Highlights:

1. Asset quality: NPLs were stable QoQ in 3Q24 as a result of write-offs and NPL sales. Adding these back uncovers a rise in NPLs of 23% QoQ (vs. 22% QoQ in 2Q24), suggesting stable NPL inflow. Stage 2 loans decreased 4% QoQ. Credit cost rose 7 bps QoQ (-73 bps YoY) to 3.15%. LLR coverage rose to 130% from 125% at 2Q24. We expect 2024F credit cost to be 3.2% (-52 bps), conservatively expecting an acceleration in credit cost in 4Q24.
2. Loan growth: +3% QoQ (slowed from 5% QoQ in 2Q24), +15% YoY, +11.3% YTD, lower than we had anticipated. We thus cut our loan growth forecast by 2 ppt in each year, to 15% for 2024 and 13% for 2025
3. NIM: +8 bps QoQ (-67 bps YoY), better than anticipated. Yield on loans rose 26 bps QoQ, higher than expected. Cost of funds rose 13 bps QoQ.
4. Non-NII: -8% QoQ (-2% YoY) from lower other income.
5. Cost to income ratio: As expected, -53 bps QoQ (+177 bps YoY) to 46.92%. Opex rose 3% QoQ and 14% YoY.

Cut earnings forecast on loan growth. We cut our 2024F by 2% and 2025F by 4% after slashing our loan growth forecast by 2 ppt for each year. We now expect earnings to grow 19% in each of 2024F and 2025F. 9M24 earnings accounted for 74% of our 2024F. We expect 4Q24F earnings to be stable QoQ and grow nicely YoY, with decent loan growth, a slip in NIM, rising credit cost and better cost to income ratio.

Maintain Outperform with a trim in TP. We maintain our Outperform rating with a trim in TP to Bt54 (based on 2.6x PBV or 16.5x PE for 2025F) from Bt56 as we expect good earnings growth to be sustainable at 19% in 2025, underpinned by decent loan growth, stable NIM and easing credit cost.

Risks. 1) Asset quality risk from an uneven and slower-than-expected economic recovery, 2) credit cost risk from falling used car prices, 3) rising competition from banks, 4) regulatory risk and 5) ESG risk from market conduct.