Brokerages remain bullish on Aditya Birla Capital stock, post the company’s Q3 results that largely met market expectations. Brokerages including Morgan Stanley, BofA Securities, Credit Suisse and Motilal Oswal see a 17-40 per cent upside for the scrip from current level.

The stock of Aditya Birla Capital closed at ₹119.20 on the BSE on Wednesday, up ₹0.55 or 0.46 per cent. It recorded an intraday high of ₹120.80 and a low of ₹118.05 during the day.

PAT doubles

Last week, the company announced its quarterly performance. It’s consolidated Q3-FY22 net profit doubled to ₹576.74 crore compared to ₹288.68 crore a year ago. “The reported consolidated profit after tax includes net gain of ₹161 crore from sale of about 1 per cent stake in the AMC business, through its IPO in October 2021,” it said in a statement.

Total revenue from operations increased by 13.4 per cent to ₹5,705.33 crore (₹5,031.79 crore). Its overall lending book (NBFC and housing finance) grew 7 per cent y-o-y to ₹61,411 crore. The gross premium across life and health insurance for the nine months grew 24 per cent y-o-y to ₹9,236 crore.

Betting on growth 

Brokerages bullish outlook on the stock is based on its potential for growth as it continues its expansion journey. Morgan Stanley gave the stock an ‘Overweight’ at a target price of ₹158, as the overall PAT was line with its expectation.. 

“NBFC’s PPOP was also in line and growth was strong, but credit costs were higher than we expected. Management guided for a meaningful reduction in bad loans over the next two quarters. Underlying RoE expansion journey across the various businesses continues,” it said in research note. 

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Credit Suisse increased its FY22E by 8 per cent on one-off gain and fine-tuned FY23-24E. However, even as it maintained an Outperform rating on the stock, it reduced the target price from ₹145 to ₹140, valuing the AMC business at its CMP. The Outperform rating is based on the strong growth in customer base (+46 per cent YoY to 31 million) that is “driving improvement in retail growth and profitability across the businesses.”

BoFA Securities gave the stock a Buy rating, but reduced the target price to ₹155, down from ₹163. 

Hike in target price

HDFC Securities, however, increased the target price to ₹157 from ₹155 earlier, maintaining its Buy rating on the stock. Similarly, Investec also gave hiked the target price to ₹155 from ₹146 earlier while maintaining its Buy stance.

“Based on the continued improvement, management now expects to exceed FY24 aspirations...We believe ABCL is all set to reach consol. RoE of 13 per cent by FY23 and deliver PAT CAGR of 32 per cent over FY20-23E,” it said. 

ICICI Securities gave the stock a Buy rating at a target price of ₹169, adding that further investment in franchise, cross-sell and leveraging digital are expected to aid in improving RoEs. “The stock still seems undervalued and our target price of ₹169 provides significant upside potential,” it said. 

Motilal Oswal Research, the most bullish among brokerages, maintained its Buy rating with a target price of ₹170, adding that the company is “poised for growth ahead buoyed by an improvement in operational metrics.”

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