21 August 2023
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" Brighter outlook for 2H23 "

We maintain BUY rating and a new fair price of Bt30. We think the recent decline in the stock price moderately factored in the weak 2Q23 results. After attending the Analyst meeting, we reduced earnings projections by 2%/3%/4% for 2023-25 based on lower NIM assumptions. We expect TIDLOR’s earnings growth to slow at 7% in 2023 and expand by 22%/21% in 2024-25, respectively. We anticipate a steady increase in earnings from a low in 2Q23, with greater asset quality resiliency in 2H23. We expect that TIDLOR's earnings will increase 16% YoY and 6% HoH, largely supported by higher net interest income and fee income.

**Analyst meeting **

• Despite steady loan growth of 23% YoY in 1H23 TIDLOR maintained its 2023 financial targets: loan growth of 10-20% (1H23: +23%), non-life insurance premium growth of 20-25% (1H23: +28%), NPL ratio of <1.8% (2Q23: 1.54%), and credit cost of 3.0-3.5% (1H23: 3.1%).

• Loan recovery was better than projected for the company. The NPL ratio was forecasted to peak in 2Q-3Q23 and credit costs likewise rose over the periods, with decreasing credit costs expected in 4Q.

• Higher funding costs from new debentures and loans with higher interest rates continued to put pressure on net interest margin (NIM) in 2H23. TIDLOR had no intention of raising its lending rates in 2H23.

• Following a pause in 1H23, TIDLOR would restart network growth in 2H23. It planned to open 500-600 new branches during the next three years. The cost-to-income ratio was approximately 55% (mid-50s).

• As TIDLOR focused on secured loans, the BOT’s responsible lending guidelines had no negative impacts.

More sustainable growth in 2024

• We fine-tuned our earnings projections as we reduced our NIM assumptions by 5-10bps by 2023-25 due to an increase in funding costs. We assume NIM to decline from 15.8% in 2022 to 15.3% in 2023 and 15.1% in 2024-25, respectively.

• Net profit in 1H23 was Bt1.9bn, accounting for 48% of our 2023 net profit of Bt3.9bn (+6.6% YoY). We anticipate that its 2H23 net profit will increase 16% YoY and 6% HoH, owing to greater net interest income and fee income.

• For 2024-25, we expect a more substantial earnings growth of 22%/21% in 2024-25, underpinned by higher net interest income and credit cost reduction.

Maintain BUY with a lower fair price of Bt30

We reduce our fair price to Bt30 (from Bt32) reflecting the earnings downgrade. Our valuation is derived from the GGM model, implying a 2.5x PBV’24E and a 17.8x PE’24E.