Buy Motilal Oswal Financial; target of Rs 633: HDFC Securities

HDFC Securities' research report on Motilal Oswal Financial

For 4QFY20, broking segment PAT was hit by expansion costs and declined 7.8% QoQ, while steep MTM hit on AUMs hit the AMC as PAT declined 12.9% QoQ. Management sold bad loans to reduce NPLs, while slippages remained low resulting in the housing finance business delivering a PAT growth of 117.3/9.3% YoY/QoQ. Large MTM loss of Rs 3.5bn on the firm’s treasury, however resulted in a consolidated (ex. MOHL) net loss of Rs 2.7bn.

Outlook

We reduce our estimates but retain BUY with a 5.2% lower TP of Rs 633, as core (broking and AMC) profit growth outlook weakens for FY21E.