Stocks To Buy This Week: Buy Jio Financial Services For A TP of Rs 290; KRChoksey

Jio Financial Services Ltd.'s shares wrapped up at Rs 243.65 on the BSE on Friday, up 0.95% from the previous settling of Rs 241.35. The market value of the NBFC company was registered at Rs 1,54,797.77 Cr. The stock is up 3.75% year to date in 2024, but KRChoksey, a brokerage company, is more bullish about the stock and has set a target price of Rs 290, which suggests a possible upside of 19.34%.

Investment Rationale

"Jio Financial Services Ltd. aims to increase financial services penetration with the acceleration of its strategy of being a digital-first financial solution company. The NBFC will leverage its strong brand equity, which will support building a robust customer base across all its businesses through cross-selling. The NBFC's strong capital base is sufficient to cater to the growth strategy of the Company and also act as an adequate cushion for any contingencies going ahead," said the brokerage.

"We expect the lending business to report an AUM of INR 46 Bn in FY24E, with a ramp-up in the product pipeline that is in line with consumer requirements. The increased use of mobile apps and push towards UPI-based payments will enable JIOFIN to witness robust traction in volumes given the strong customer base of the parent group, which has above 450 Mn telecom subscribers as well as ~250 Mn retail customers as of FY23. With the partnership with Blackrock for the AMC business, we expect the AUM in FY24E post-license approval and product launch to be around INR 23.3 Bn given the industry opportunities, brand equity, attraction towards the capital market, and the right choice of product basket," KRChoksey added in a note.

Outlook

"Jio Financial Services aims to democratize financial services across the country by offering simple, innovative and intuitive products which will be delivered digitally. It will aim to serve the needs of two categories customers namely, a) consumers and b) merchants. We believe the focus on the consumer lending segment will continue to dominate the entire business profile of the Company, considering a healthy trajectory in the credit offtake led by this segment. In a phased manner, it aims to provide financial services to fulfil customer needs across the important spectrums of financial services. The expansions of products across the businesses will widen JIOFIN's product and services offering to its customers and can leverage its distribution network to cross these to its existing customer base, which will likely to expand the revenue base for the Company," the brokerage stated in a note.

"The penetration of mobile data indeed provides a strong opportunity to serve the transacting needs of its customers through its digital products. These payment capabilities are , however, expected to provide vital fulfilment tools for all its products across all subsidiaries. JIOFIN is well-positioned to gain higher traction across all its business segments given its strong parentage and a wide customer base of its parent company. The diversified business model is well placed to fulfil the financial requirements of the customers. The lending demand moving towards consumption & unsecured finance and the current gap in addressing customer requirements are the strong triggers for the shift in the product mix. JIOFIN is planning to build a comprehensive ecosystem to cater to various financial services. It is actively exploring partnerships which will help to offer co-branded credit cards to its customers. Capital adequacy is expected to remain strong for the NBFC, which will support the growth aspiration of the company and also act as a provision buffer for any contingencies," a report from KRChoksey noted.

Jio Financial Services Share Price Target

"We initiate coverage on JIOFIN with a BUY rating and target price of INR 290 per share, with a 23.2% upside from current levels and assigning a P/ABV multiple of 2.0x with a Holdco discount of 20.0%," said the brokerage.

"We value the NBFC based of its September-23 Book value of INR 180.0 per share. We assign a P/BV multiple of 2.0x on to arrive at a Target Price of INR 290 per share, an upside of 23.2% over CMP. We have considered a holding company discount of 20.0% for JIOFIN's subsidiary valuation. We Initiate Coverage on JIO Financial Services Ltd. with a BUY rating," added KRChoksey.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.