Motilal Oswal’s target price of Rs 350 suggests that the multibagger stock has the potential to surge another 25% from its current market price of Rs 280. The stock has given returns to the tune of 43% year-to-date (YTD) while it has rallied 444% in the last three years.
With huge growth opportunities for consumer and small business finance, the brokerage said that post-acquisition, PFL’s management has strengthened its foundation notably by investing in technology (aiding infrastructure/processes), distribution and talent.
“With new promoters on board, PFL’s access to liabilities rose multifold and it was able to achieve credit rating upgrades that resulted in a significant decline in the cost of borrowings (down ~190bp over last 12 months) with better and more diversified liability mix,” Motilal Oswal said in a report.
The brokerage expects positive results of the transformed company to become visible within the next three-to-six months.
“PFL has laid down a robust foundation for sustainable profitability through initiatives that will lead to lower operating costs (as a % of AUM), higher business volumes and robust asset quality,” it said.
It expects an asset under management (AUM)/PAT CAGR of 37%/~65% over FY22-FY25E, respectively and a return on assets/return on equity of 4.8%/~12% in FY25E.
Poonawala Fincorp is an NBFC which focuses on consumer and small business finance via products like personal loans, loans to professionals, business loans, SME loans, LAP, pre-owned car finance, medical equipment loans and auto lease. The NBFC is the erstwhile wherein consequent to a capital raise of Rs 3500 crore in May 2021, the Poonawalla Group acquired a controlling stake.
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