Add This Mid Cap Financial Stock, Shares Can Surge Upto 52%, Says HDFC Securities

Leading brokerage firm HDFC Securities has given a Add rating to Motilal Oswal Financial Services Limited for a Target Price of Rs 1,065 per share. With the given target price, the stock is likely to surge 52% from its current level. It is a mid-cap leading financial service provider company in India. The company is engaged in broking and allied services. It has a market cap of Rs 10,443.35 crore.

Stock Outlook & Returns

The last traded share price of the stock on NSE is Rs 700.60 per share, down 3.04% as compared to its previous close of Rs 718.05 per share. The stock hit a fresh 52 week low at Rs 690.25 on 21 October 2022. Its 52 week high level is Rs 1,014.80. 

The stock in a week fell by 0.2%, in a month fell by 6.76%, and in 3 months fell by 13.71% respectively. Over the past 1 year, it fell by 21.36%, giving a negative return on investments. However, the stock in the past 3 years has given a positive return of 16.67%. In the past 5 years, it has given 49.65% negative returns. 

 

Healthy core performance

AMC (ex-WM): Despite a soft top line in AMC, better margins drove PAT 13% higher QoQ at INR0.43bn. However, the PE business delivered stellar growth with APAT at INR154mn (+87% QoQ) as IBEF-IV began accruing management fees. Amidst uncertain and volatile markets, MOAMC continued to witness net outflows at INR5.7bn (vs. INR2.2bn in Q1) skewed towards MF and PMS. Capital markets (incl WM) clocked better profitability at INR1.4bn (+37% QoQ); while the broking business fared well with improving cash/derivative ADTO market share at 5.8/3.9% (+10/70bps QoQ), sustained investments in WM distribution remain a drag on EBITDA margins at 22% (-10pps QoQ). NII on funding book shot up 16% sequentially, owing to improved cash ADTV.

Non-core segments

Treasury gains clocked in at INR2.8bn (vs. estimate at INR800mn) on the back of a sharp rebound in equity markets. MOHFL disbursements, at INR2.8bn, picked up the pace (+65% QoQ), benefitting from improving macro conditions and buoyant demand. Also, NNPA improved 30bps sequentially to 0.8%.

Outlook

HDFC Securities said, "We expect the AMC and PE businesses to benefit from positive flows and healthy fee collections from the IBEF-IV fund. With retail derivative broking volumes clocking all-time highs, we remain sceptical of the options segment sustaining such high growth."

Add for a target price of Rs 1,065 per share

Faring well; maintain ADD MOFS printed capital market revenue (ex-WM) 14% ahead of the estimate, driving capital markets APAT to INR1.4bn (+37% QoQ). The AMC (ex-WM) APAT beat was driven by fee accrual from IBEF-IV in the PE business; however, the portfolio management business continued to face redemptions. The APAT (ex-MOHFL) beat was led by a sharp beat in treasury income, primarily on account of a sharp rebound in capital markets, resulting in an APAT (ex MOHFL) at INR4.8bn (-8% YoY). "We upgrade our earnings estimates for FY23E/FY24E to factor in strong traction in the PE business from IBEF-IV and higher treasury income from buoyant capital markets. We maintain ADD with a target price of INR1,065 (14x/20x Sep-24E broking/AMC APAT + 0.5 x/0.5x for Sep-23E treasury/MOHFL)," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.