Motilal Oswal Suggests: Buy This Largecap Conglomerate Stock Post Demerger, Retail Loans Up 55%


Stock to buy: price target

Stock to buy: price target

The Current Market Price (CMP) of Piramal Enterprises (PIEL) is Rs. 988. Motilal Oswal has estimated a price target on the stock at Rs. 1,320 It is a large cap stock with a market capitalization of around Rs. 23,020 crore, with a dividend yield of 3.42%. This stock has the potential to return 34% in the coming year.

stock outlook
Current Market Price (CMP) Rs. 988
target price Rs. 1,320
Possible 1 year return 34.00%
52 week high share price Rs. 3,014.95
52 weeks low share price Rs. 958.30

ex merger trade

ex merger trade

PIEL had set September 1, 2022 as the effective date for the demerger of Piramal Pharma (PPL). The financial services business has already been priced and PIEL now trades as a diversified NBFC registered with the RBI. The integration of the DHFL has made good progress. The retail lending business continues to gain traction, with an improvement in the payout ratio. Several partnerships with fintechs and consumer techs have supported the momentum in the embedded finance product segment.

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Stock Perks: Motilal Oswal

Stock Perks: Motilal Oswal

The brokerage stated: “We expect its wholesale loan book to continue to weaken as the firm looks to aggressively provision and then monetize distressed exposures. In retail, we expect a payout/AUM CAGR of around 90%/30% over FY22-25E. We estimate a PAT-CAGR of 37% over FY22-25, resulting in a FY25 RoA/RoE of 2.2%/10%. Using SoTP methodology (based on FY24E) we value lending business at 1x BVPS, Shriram Group investments at our TP for their subsidiaries and life insurance and alternatives to 0.5x trailing EV and BV respectively. PIEL has an excess net worth of Rs. 48b which we have valued at 1x.”

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asset quality

asset quality

Asset quality (with slips in the wholesale book) has deteriorated over the past two quarters, with PIEL accruing in related accounts. The company currently carries ECL reserves of 6.2% of its total assets under management and ~8.5%

(MOFSLe) on its wholesale AUM, with a 38%/~54% PCR on S2/S3 loans. PIEL will use any recoveries from the POCI book or any one-time gain on the contingent liabilities (~Rs. 33b) to accrue the necessary provisions for the stressed portion of its wholesale loan book in FY23, the company said.

balance sheet

balance sheet

Over the past two years, PIEL has strengthened its balance sheet by reducing its wholesale loan book; ensured its wholesale book is granular with no exposure above 5% and only 10 exposures above 2% of wholesale assets under management; improved structure of its loans, resulting in lower borrowing costs; and prepared for eventualities with ECL reserves of 6.2% of assets under management.

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Company portfolio: Piramal Enterprises

Company portfolio: Piramal Enterprises

Piramal Group is a global corporate conglomerate with diverse interests in pharmaceuticals, financial services and real estate. The group has offices in over 30 countries and a global brand presence in more than 100 markets. The company has offices in over 30 countries. You have a team of over 10,000 employees from 21 different nationalities.

Disclaimer

Disclaimer

The stock above was selected from Motilal Oswal’s broker report. Investing in stocks involves risk of financial loss. Investors must therefore exercise due caution. Greynium Information Technologies, the author and the brokerage house will not be held responsible for any loss arising from decisions made based on the article.





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