Brokerage Jefferies India has initiated 'buy' calls on 360 One Wam Ltd and Nuvama Wealth Management Ltd and raised the target prices to Rs 900 and Rs 6,000 per share.
"We believe Indian Wealth Managers (IWMs) are well-placed to ride on economic growth and financialisation of savings, especially into capital markets. Leading players will benefit from strong inflows and operating efficiencies to deliver 20-22 percent profit CAGR over FY24-27. Rise in share of trail fees (70-75 percent by FY27) improves earning visibility and supports value re-rating," Jefferies India said in its latest note.
360 ONE is the biggest wealth manager for ultra-high-net-worth individuals (UHNIs) and a top asset manager in private markets. Jefferies anticipates a roughly 25 percent annual growth in active assets under management (AUM) for the wealth business due to network expansion and increasing client vintage from FY24 to FY27.
"As our asset management company (AMC) enters a private equity fundraising phase with significant maturities ahead, we expect around 20 percent annual growth in AUM. Despite some fee pressure, operational efficiency improvements are forecasted to lower the consolidated cost-to-income ratio by over 400 basis points over the next three years, leading to an annual growth in profit before tax (PBT) of around 22 percent," Jefferies India said.
According to the Jefferies report, Nuvama Wealth contributes around 60 percent of revenues, with UHNIs contributing 25 percent and HNIs 35 percent, along with Investment Banking (IB) at 22 percent and custody services at 18 percent, alongside a growing AMC. The management is investing in expanding the wealth franchise, aiming to double the relationship manager (RM) network by FY27, with expected growth in AUM and profit before tax (PBT) at 22 percent and 20 percent, respectively, from FY24 to FY27. The high base of IB may drag consolidated earnings with a 17 percent CAGR.
The Jefferies report uses the Dividend Discount Model (DDM) to arrive at a price target (PT) of Rs 6,000, implying a price-to-earnings (P/E) ratio of 24x by June 2026. Nuvama's valuation discount is attributed to a lower mix of wealth/annual recurring revenue (ARR), with expectations of a gradual improvement in the business mix leading to a re-rating of the stock over the medium term, although near-term upside may be limited following recent gains.
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