ICICI Securities Bullish On This Midcap Capital Market Stock, Suggests "Buy" For 72% Return

ICICI Securities has recommended investors to "Buy" the stock of JM Financial Ltd, a midcap Capital Market stock for an estimated target price of Rs 109/share. The given target price indicated a potential upside of up to 72% from the stock's current level. Its market valuation is Rs 6,058.12 crore. Read below:

JM Financial's Stock Outlook & Return

On NSE, the stock of JM Financial last traded at Rs 64.50/share. The stock is trading 11.12% up from its 52 week low of Rs 63.45/share, recorded on 17 June 2022. The stock's 52 week high is Rs 84.90/share, recorded on 5 December 2022.

The stock has fallen 1.7% in 1 week, and 10.57% in 1 month, respectively. It has fallen 14.02% in 3 months and 3.42% in 6 months, respectively. In 1 year it has fallen 6.14%. in declined 44.29% in 3 years and 59.68% in 5 years, respectively.

 

Loan growth momentum continues; gaining earnings traction in non-lending business is key to rerating

According to the brokerage, JM Financial's (JMF) Q3FY23 earnings were characterised by: 1) Consolidated loan growth was up 4% QoQ (on a higher base) and 36% YoY. 2) Retail mortgage disbursements were up 17% QoQ/ 34% YoY; AUM was up 86% YoY; network rises to 78 branches vs 50 YoY. 3) Resolutions led to a decline in stress pool to 4.7% (GNPA + SMA-2) vs 5.2% QoQ. 4) Investment banking - PAT hovering around Rs1.0bn since past five quarters. 5) Alternative and distressed credit - closed two deals of which one was retail loan portfolio acquisition and 6) Platform AWS - revenue flat QoQ; investments in franchise continues; RoE at 3.6%. Overall, consolidated PAT came in line with estimate at Rs1.90bn (up 6% QoQ, down 12% YoY), translating to consolidated RoA of 3.6% and RoE of 9.5%. However, Q3FY22 PAT includes Rs568mn towards income from IPO financing activity, which was nil for Q3FY23. Adjusting for IPO financing activity, PAT was up 19% YoY.

 

Buy For a Target Price of Rs 109/share

According to the brokerage, With Q3FY23 being in line with expectations, company is closely moving towards its guidance: 1) Doubling the mortgage lending portfolio to Rs150bn by FY24 (Rs120bn of wholesale mortgage and Rs30bn of retail mortgage) with targeted RoE of 15%; 2) contain net NPA + SMA-2 at less than 5%; 3) drive investment bank business RoE towards high-teens (from 14.8% in FY22), 4) target RoE of 25% by FY25 (vs 12.3% in FY22) in Platform AWS business (focused on retail clients) by leveraging technology/digital infrastructure; and 5) scale-up mutual fund AUM to Rs250bn by FY25 (vs Rs23bn in FY22). Maintain BUY with a revised SoTP-based target price of Rs109 (earlier: Rs119).

According to the brokerage, Key risks are: i) Deferral in resolution of ARC stressed assets; ii) modest earnings trajectory in Platform AWS due to continued investments.

 

Disclaimer

The stock has been picked from the brokerage report of ICICI 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 consult with certified experts before making any investment decision.