Buy This Midcap Financial Stock In January For High Returns As Recommended By ICICI Securities

Leading brokerage firm ICICI Securities is bullish on Motilal Oswal Financial Services Ltd. (MOFSL). The brokerage recommended "buy" the stock with a target price of Rs 900/share. The stock purchased at the current market price could fetch 23% returns considering the given target price. MOFSL is a well-diversified financial services company. The company is a midcap financial sector company. with a market capitalisation of Rs. 10,890.26 crore.

Stock Outlook & Returns

The stock of Motilal Oswal last traded at Rs 736.45/share on NSE, down 0.85% from the previous close. The stock recorded its 52 week low on 25 November 2022 at Rs 653/share and 52 week high on 18 January 2022 at Rs 1,005.95/share, respectively. 
The stock has given 3.19% in the last 1 week, 4.05% in the last 1 month and 4.28% in the last 3 months, respectively. Whereas, it has fallen 22.72% in the last 1 year, 13.87% in the last 3 years and 50.38% in the last 5 years, respectively. 

 

Diversified play on capital markets; levers for growth exist in each segment

Motilal Oswal (MOFSL) is well diversified in its business offerings which include flow-based broking (45%), stock-based asset/wealth management (WM)/distribution (22%), lending related to capital markets (11%), affordable housing (14%) and private equity/real estate segment (PE/RE) (4%) (all percentages of consolidated core operating revenue excl. interest on bank deposits). There is opportunity for strong execution-based outperformance in most segments like gain in market share in broking, increasing relationship managers (RMs) in WM, better fund performances in AMC, improvement in asset quality in housing and establishing a multi-year cashflow stream from the PE/RE business. "We like the well-knit synergistic approach of the management towards all business groups and consider current valuation attractive (vs peers in respective industries) considering the strong brand, business potential and well-entrenched franchise of the company," the broekrage has said.

Buy for a target price of Rs 900/share

Motilal Oswal said, "We initiate coverage on the stock with BUY rating and target price (TP) of Rs900 based on FY24E SoTP valuations (12/15/15/5/5 times P/E on core PAT for broking and distribution / AMC / wealth management / PE&RE / investment banking, respectively, 0.7/1.2 times P/B for capital market/ affordable housing lending, respectively, and 1 time on fund-based H1FY23 AUM). Considering the group structure, we have also applied 20% holding discount for all businesses."

It added, "We estimate 11% CAGR in consolidated adjusted EBITDA (post interest expense and excluding other operating income i.e. fund-based income etc.) during FY22-FY24E. Excluding carry income (Rs1.23bn in FY22) within PE/RE business, the same CAGR is 16%."

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.