Angel Broking has initiated coverage with Buy rating on Capital First, the non-banking finance company and set a target price at Rs 850, implying a 22.4 percent potential upside from Monday's closing price.
The stock rallied nearly 2 percent in early trade Tuesday but came off early highs due to volatility in the market.
At 09:55 hours IST, the stock price was quoting at Rs 698.55, up Rs 3.95, or 0.57 percent on the BSE.
The stock is poised for re-rating with improving return ratios, it said.
The research house further said change in ownership & management brought new life to company.
Strong capital adequacy and pick up in retail credit will ensure loan growth, it added.
Angel Broking feels the favorable loan mix with expansion in net interest margin will drive earnings. It expects AUM/earnings to grow at CAGR of 23/32 percent over FY17-20.
The formalisation of economy will open new opportunities, it feels.
Housing finance is small portion of its revenue but has huge potential. Reducing dependence on bank borrowings will lower its cost of funds, Angel said.
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