Aditya Birla Capital shares: Up 30% in one year! Jefferies sees 25% more upside; should you buy? Target price, rationale
Giving rationale behing the ‘buy’ tag being given to the Aditya Birla Capital shares, the Jefferies India report said, “Aditya Birla Capital Ltd should benefit from rising rates as 70% floating-rate assets and 56% floating liabilities support NIM expansion. AUM should grow at 26% CAGR over FY26-28e, led by healthy momentum in unsecured and steady growth in secured loans. Fee income risks from proposed tighter insurance commission norms are lower than peers. Benign unsecured environment and limited rural exposure should keep AQ steady. At 1.8x FY28e BV, valuations seem reasonable.”
The global investment bank report said that ABCAP's margin has dipped 15bps since 4QFY25 despite a 330bps rise in mix of higher-yielding unsecured loans, in contrast to market expectation of NIM expansion on rising unsecured mix. We think yield compression in secured MSME and wholesale loan book (70% of the book) due to lower rates offsets mix gains. ABCAP’s secured MSME (ATS Rs14mn) and wholesale (ATS Rs760mn) target large-ticket segments that compete with banks and thus are anchored to bank lending rates (price setter in these segments) like prime housing loans. Avg standalone NBFC yields thus fell 60bps through the recent easing cycle despite rising unsecured mix.
“As banks reprice loans in these segments following rate hikes, portfolio yields in these segments should improve; CoF should rise, too, but gradually, given 56% floating-rate liabilities. We expect NIMs to expand 13 bps over FY27-28E,” Jefferies India report said.
“We expect ABCAP's AUM to increase at a 26% CAGR over FY26-28, supported by sustained momentum in unsecured consumer and MSME BL, steady growth in its secured MSME and wholesale loans, and scaling up of its new gold loan portfolio. ABCAP plans to add 1,000 gold loan branches over next 3 years (200-300 in FY27). With insurance commissions at only c.3% of total FY27e PBT (FY26), fee income risks due to proposed tighter insurance commission norms should be lower than most peers,” the Jefferies India report added.
Giving a ‘buy’ tag to Aditya Birla Capial shares, the Jefferies India report said, “We tweak FY27-29E NBFC EPS by -1% to 3% and consol. EPS 0-2%. We expect standalone EPS (NBFC) to grow at 30% CAGR and ROE to improve to 16.5% from 13.6% in FY26 over FY26-28E. Implied NBFC business is trading at 1.95x FY1E BV (1.8x FY28e BV). Our SOTP-based PT of ₹475.”
Asit Manohar has nearly two decades of experience in the mainstream media. In this period, he has served esteemed media organisations like NDTV Profit, The Economic Times, and Zee Business. He has been working at LiveMint Digital since April 2021. During these two decades of journey in mainstream media, Asit has mainly covered external affairs, markets and personal finance. However, his earliest beats include railways, SME, MSME, and politics (Congress beat). Some of his features on political, economic, and foreign policy are documented in the parliamentary records. <br><br> While pursuing his MA (Mass Communication, Session 2004-06), Asit began his media career as a stringer at All India Radio in Varanasi. At AIR Varanasi, Asit worked with the Gyanvani, Yuvvani and Vividh Bharti teams. After working for nearly one year at AIR Varanasi, he shifted to print journalism and started working as a stringer for the HT Media Ltd, Varanasi. At HT Media Ltd in Varanasi, he covered the BHU beat. <br><br> Asit has also worked with some brokerage houses. He has worked with Religare Broking and India Infoline, where he assisted the research team in developing and executing trade strategies for intraday cash, F&O, and commodities. <br><br> Asit is a Gold Medalist in MA (Mass Communication) from BHU, Varanasi. He did his BSc. (Hons) in Mathematics from Magadh University, Bodh Gaya. Asit was a National Talent Scholarship holder during his senior secondary studies (1988-91).
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HomeMarketsStock MarketsAditya Birla Capital shares: Up 30% in one year! Jefferies sees 25% more upside; should you buy? Target price, rationale
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