Top Brokerage Bets On This Multibagger Diversified NBFC Stock, Recommends Buy, Sees 22% Upside

Hem Securities has given a "BUY" tag on IIFL Finance Limited's stock with a Target Price of Rs 604/share. The stock is likely to give 22% positive returns if you buy the stock at the current market price considering the target price. IIFL Finance is a diversified NBFC in India engaged in the business of loans and mortgages along with its subsidiaries. IIFL Finance is a midcap stock having a market capitalisation of Rs 18,892.05 crore.

Stock Outlook & Returns

The stock on NSE last traded at closed at Rs 497.50 apiece. It surged 1.64% in the last 1 week. In the last 1 month, it surged by 19.32% and in the last 3 months, it surged by 37.47%, respectively. Over the last 1 year, it has given 66.22% positive returns on investments to shareholders. It has given 229.03% multibagger returns in the last 3 years. However, in the last 5 years, the stock fell, giving a 17.9% negative return.
On NSE, the recorded 52-week high of the stock is Rs 508, which was recorded on 13 December 2022, and the 52 week low is Rs 266.05, recorded on 27 December 2021, respectively.

Results Overview

IIFL Finance reported the highest ever PAT at Rs 397 crores (+36% YoY, +20% QoQ)- driven largely by volume growth and lower credit cost. PPoP stood at Rs 685 crores (+23% YoY, 2% QoQ). IIFL Home Finance received Rs 2200 crore from a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA) in August 2022, boosting the net worth of IIFL Home Finance by more than 80%.

Management Commentary

AUM growth can be maintained at the current run rate. The management expects credit cost to continue trending downwards. FY23 credit costs are expected to be somewhere between 150-200 bps. The management is aiming to grow the MFI book a little faster than the industry. Management expects ROA can be sustained at current levels. Management aims to triple its co-lending book to over Rs 13000 crores in the next 12 months.

 

Segmental Analysis

Loan Book Breakup: Home Loan (36%), Gold Loan (32%), Business Loan (14%), MFI (12%), CRE (5%), Capital Market Finance (1%). 

Loan Book Growth QoQ: Home Loan (5.71%), Gold Loan (4.10%), Business Loan (4.47%), MFI (7.14%), CRE (4.6%), Capital Market Finance (-19.60%).

Concall Summary

Core Loan AUM registered a growth of 28% YoY and 5% QoQ. Asset quality improved with GNPAs at 2.40% versus 2.60% QoQ and 2.30% YoY. 95% of the loans are retail in nature. IIFL Finance tied up with South Indian Bank and KVB during the year for gold loans. The company has also entered into a partnership with ZestMoney to get access to the customer base on latter's platform. Zest Money is India's fastest-growing digital EMI/ Checkout Financing platform. Off Book to AUM came in at 39% vs 35% YoY.

Other Developments

The company is very active in the co-lending space and is in talks with several Public Sector Banks for partnerships in order to accelerate its colending program. Co Lending as a percent of Total AUM is 13.50% in case of Gold Loans and 15.10% in case of Home Loans.

Valuation and outlook

The system credit growth is going very robust and the overall demand for credit looks strong even in the rising rate scenario. IIFL Finance is a diversified NBFC. Branch expansion benefits shall now start to accrue and the company's medium term Opex to Assets ratios will tread lower in the medium term. The company shall also benefit owing to diversification. "We initiate a "BUY" rating on the stock and value the stock at 2.2x FY24 estimated Book Value to arrive at the Target of Rs 604," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of Hem 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.