Equity Group Holdings’ short-term earnings headwinds

We reduce our earnings estimates for Equity Group (the group) by 16.5% in FY23e and 16.8% in FY24e. It can largely be explained by higher operating expenses, up 11.7% in FY23e and 15.6% in FY24e, driven by inflation, foreign exchange (FX) devaluation, and increased investments (in IT, staff, and new subsidiaries) by the group. We expect group asset quality will remain under pressure from regional and global headwinds. We expect the non-performing loans (NPL) ratio will rise from 8.0% to 9% in FY23e and from 7.0% to 12% in FY24e. It will raise the Combined Operating Ratio (CoR) from 1.7% to 2.25% in FY23e and from 1.5% to 2.0% in FY24e.