A company is said to be ‘fundamentally strong’ when it portrays a certain set of characteristics, viz, strong and consistent financials, lower leverage ratios, and many more.
Listed below is one such fundamentally strong NBFC stock that received a ‘Buy’ call from Motilal Oswal for a potential upside of 28 percent:
IIFL Finance Limited
With a market capitalization of Rs 23,842.12 crores, the stocks of IIFL Finance Limited currently trade at Rs 625.25, a flat movement as compared to the previous closing levels of Rs 626 apiece.
Having a quick walkthrough of the company financials, the prime business indicators such as operating revenues as well as after-tax profits showed favourable movements. The former shifted from Rs 2,305.47 crores during Q1FY23-24 to Rs 2,475.7 crores during Q2FY23-24 and, the latter, during the same period, rose from Rs 472.86 crores to Rs 525.52 crores.
In addition to the above, the company’s profitability ratios, such as the return on equity (RoE) and the return on capital employed (RoCE), were on the rise in the past couple of years. The RoE marginally moved from 20.1 percent during FY21-22 to 20.83 percent during FY22-23, and, the RoCE, in congruence with the pattern, shifted from 11.39 percent to 11.8 percent.
The company’s debt-to-equity ratio, too, went down from 5.54 times during FY21-22 to 4.41 times during FY22-23. Moreover, the net profit margin of the company grew from 18.9 percent to 21.16 percent keeping the timeframe the same.
Motilal Oswal, one of the well-known Brokerages based in India, gave a ‘Buy’ recommendation on the company’s stock with a target price of Rs 800 indicating a potential upside of 28 percent compared to the prevailing stock price level.
The rationale behind providing such a recommendation pertains to the aggressive off-book strategy, efficient liability management, mitigations in borrowing costs, and co-lending activities improving the earning quality of the corporation.
The latest shareholding pattern data of the company exhibits the Promoters holding a 24.81 percent stake, and the Foreign Institutional Investors (FIIs) holding a considerable stake of 28.31 percent in the company.
IIFL Finance Limited, along with its subsidiaries, is engaged in the business of providing financial services in India. The company operates under two primary business units, viz, ‘core’ products, including home loans, gold loans, etc, and ‘synergistic’ products, including operations in capital markets, construction, and real estate.
Written by Amit Madnani
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
