Credit Suisse initiates coverage on Edelweiss, stock jumps 7% & hits 52-week high

Edelweiss Financial Services was on the radar of investors on Wednesday after a global financial services firm initiated coverage on the stock. The stock gained 7 percent intraday and hit its 52-week high mark.

Credit Suisse, in its note, said that it had initiated coverage with an outperform rating on Edelweiss Financial Services with a target price of Rs 220. This, it says, is based on its progress from being a capital market player to a lender and with growing businesses in wealth management and insurance.

This rounded business portfolio should help the firm tap the growing wealth management market. Simultaneously, it expects losses in the insurance business to peak in the next few years as well. .

“We build in flat margins and credit costs, leading to a gradual improvement in lending ROAs. We expect Rs 6,000 crore in capital infusion in the ARC over the next three years,” the report added.

The research firm highlighted that the company’s lending focus on the retail side will now start bearing fruit and expects 26 percent loan book CAGR over three years.

“The company should also benefit from a secular rise in financial investments in India (mutual fund and broking). Overall, we expect a 34% EPS CAGR over the next three years,” it said in its report.

Among key risks to the stock is the margin pressure in home loans, lack of growth opportunities in distressed assets and a delay in insurance profitability.

The stock has gained nearly five percent in the past one month, while its three-day gain stood at 4 percent.

At 09:30 hrs Edelweiss Financial Services was quoting at Rs 199.00, up Rs 13.70, or 7.39 percent on the BSE. It touched a 52-week high of Rs 200.70.