Kotak Securities Picks 3 Financial Sector Stocks To Invest, Recommends Buy & Add For High Returns

Kotak Securities picks 3 Diversified Financial sector stock namely Aditya Birla Sun Life AMC, UTI AMC, and Nippon Life India AMC to invest. The brokerage has placed Add tag call on Aditya Birla Sun Life AMC and Nippon Life India AMC, while, it has placed Buy tag on UTI AMC.

The brokerage in its report on the Diversified Financials Sector published on December 9, 2022, said, "We believe sector valuations have largely priced in the impact of negative regulatory and market forces at play in recent years. Given the possible cyclical slowdown in flows, we are of the view that incremental value creation will be a function of company-specific growth or margin levers. Our in-depth examination of fund performance and distribution models also gives us confidence in the relevance of active fund management. Initiate on Aditya Birla (ADD), UTI (BUY) and Nippon (ADD)."

Aditya Birla Sun Life AMC

Kotak Securities placed an "ADD" tag on Aditya Birla AMC's stock with a target price of Rs 480/share. It sees a potential upside of 6% from its current level.

The stock on NSE last traded at Rs 454.80/share, 0.80% up from its previous close. Its 52 week high level is Rs 598 and its 52 week low level is Rs 375.

The stock got listed on the stock exchange on 11 October 2021. Since its listing, it has given 34.98% negative returns. The stock in a week has given 5.27% positive returns and 5.95% in the last 1 month, respectively. In the last 3 months, it has given 8.14% negative returns and 22.34% negative returns in 1 year.

Brokerage's Comments

The brokerage in its Diversified Financials sector report said, ABSL's long-term track record, geographical penetration and large SIP book are its key strengths, but near-midterm challenges are three-fold: (1) weak fund performance, (2) higher debt share is a growth drag, and (3) while in the early days, the passive positioning remains weak versus peers so far.

Rationale:

• Long-term track record, diversified distribution, penetration, large SIP.
• Weak equity fund performance across buckets, implying lower AUM growth.
• A higher share of debt AUM, which has become a drag.
• A relatively weak passive positioning, among retail/HNI clients.
• DCF-based FV calculation to arrive at a Fair Value of ~Rs480.

Nippon Life India AMC

Kotak Securities initiates coverage on Nippon Life India AMC with a Add call for a target price of Rs 300/share. The brokerage claims a potential upside of up to 12% from its current level.

The stock on NSE last traded at Rs 269.90/share, 0.32% up from its previous close. Its 52 week high level is Rs 375.55 and its 52 week low level is Rs 252.

The stock in a week has given 1.68% positive returns and 2.41% in the last 1 month, respectively. In the last 3 months, it has fallen 8.89%, whereas, in 1 year it has fallen 26.33%. In 3 years it has fallen 22.39%, whereas, in the last 5 years it surged 7.27%.

Brokerage's Comments

The brokerage in its Diversified Financials sector report said, Except for a captive distribution, Nippon ticks most right boxes: Excellent fund performance, diversified/deep distribution and a relatively strong passive product profile. "We like the franchise, but we find valuations to be quite fair," the brokerage said.

Rationale:

• NAM now appears to be well-placed well-diversified active fund lineup.
• Strong passive presence and extensive footprint.
• NAM likely has the one of the most attractive dividend policies (90% payout).
• We like the franchise and initiate with a positive view but find limited upside.
• ADD rating and Rs. 300 FV, valuing it at ~21X December 24E earning per share

UTI AMC

Kotak securities initiate coverage on UTI AMC with a buy call with a target price of Rs 940/share. According to the brokerage's given target price, it is likely to give a return of up to 22%.

The stock on NSE last traded at Rs 777.80/share, 1.71% up from its previous close. Its 52 week high level is Rs 1,109.35 and its 52 week low level is Rs 595.

The stock got listed on the stock exchange on 12 October 2020. Since its listing, it has given 64.33% positive returns. The stock in a week has fallen 0.34%, and in the last 1 month surged 13.55%. In the last 3 months, it has fallen 4.73%, whereas, in 1 year it has fallen 23.97%.

Brokerage's comments

The brokerage in its Diversified Financials sector report said, "We believe UTI offers the best risk-reward in the space, given the healthy fund performance on 3Y/5Y, strong reach (high B-30 share) and maximum visibility among peers to control costs, given the already high base."

Rationale:

• Strong fund management credentials, deep distribution and a long-standing brand.
• Equity market share has stabilized in recent years.
• Among listed peers, it likely has maximum visibility to control costs.
• Higher buffer to absorb yield/Asset under management growth pressures.
• Recent weakness in fund performance is one of the key risks to lookout for.
• • Initiate with BUY and Rs. 940 FV - ~19X December 24E earning per share.

Disclaimer

The stocks have been picked from the brokerage report of Kotak 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.