Results sustain Gentera in our top-picks
Another quarter with outstanding results, reaching new record highs in portfolio and earnings (MXN 1.5 billion), with NPLs contained despite growth and significant improvement in ROE to ~20%.
Given the strong results and favorable dynamics, the company raised its guidance by ~15%. We reiterate Gentera in our top-picks with a still-compelling valuation
Appropriate strategies and environment dynamics drove new record highs. Gentera continues to show outstanding results, and we expect this trend to continue in an environment with favorable dynamics. The loan portfolio reached another record high, rising 27.2% YoY to MXN 51.4 billion. This, as the result of: (1) the 33.0% growth in Compartamos Banco's portfolio; (2) the 17.1% YoY recovery in Financiera Perú; and (3) the 33.3% YoY increase in ConCrédito. As a result, financial income rose 29.5% YoY. Interest expenses hiked 96.4% YoY, but much of the growth was explained by the implementation of IFRS-9, which now includes costs derived from loan origination and interest related to leasing contracts -formerly classified as operating expenses-. As a result, Financial Margin grew 23.3% YoY, very similar to our estimates. Meanwhile, provisions increased 50.4%, which was partly attributable to portfolio growth, but also recalling the low comparison base in Mexico during 3Q21, and a change in Concrédito methodology. As a result, NIM stood at 32.7% (vs. 30.6% in 3Q21 and 33.3% in 2Q22). Non-performing loans increased sequentially to 2.9% vs. 2.5% in 2Q22, more normalized levels in accordance with the risk profile of the business, recalling that portfolio quality remains a priority -the company's medium-term target is between 3.0% and 3.5%-. In this context, net income increased 130.5% to MXN 1.5 billion (slightly above our estimate) and ROE recovered to 19.7% vs. 16.0% previously. With the results, Gentera increased its 2022 guidance by ~15% to MXN 4.7 – MXN 4.89 billion, which we will be incorporating into our estimates, and is preparing to pay a dividend of MXN 0.30 per share before November 23rd (1.5% yield). Besides, a compelling valuation, with P/E down from 8.6x to 6.9x, which remains attractive, in our opinion. We reiterate to BUY.