Buy Piramal Enterprises; target of Rs 1100: Motilal Oswal

Motilal Oswal's research report on Piramal Enterprises

PIEL reported 3QFY24 net loss of ~INR23.8b (vs. ~INR482m profit in 2Q). Reported PAT included provisions of ~INR35.4b on AIFs. The management exuded confidence in the full recovery of its AIF investments. Normalized PAT (excluding exceptional and one-off items was flat QoQ at ~INR1.2b. PPOP (excl. dividend income and one-offs) grew ~30% QoQ to ~INR2.6b. Opex/AUM remained broadly stable at ~3.8%. NII declined ~20% YoY (but grew ~11% QoQ) to INR8.3b. Other income included interest income of ~INR640m from income tax refunds in 3QFY24, but the core fee income trajectory continued to improve. Annualized net credit cost stood at ~1.6% in 3QFY24 (vs. 1.2% in 2Q). Total ECL provisions improved by ~30bp QoQ to 4.3% of total AUM. Total AUM grew 6% QoQ and 9% YoY, excluding the impact of AIF provisions. Wholesale 2.0 AUM grew 24% QoQ to INR55.6b, while Wholesale 1.0 AUM declined 47% YoY to INR187b.

Outlook

We estimate a ~25% AUM CAGR over FY23-26, including a ~43% CAGR in Retail AUM over the same period. Its core business (excluding one-offs and exceptional) is showing signs of improvement. Reiterate our BUY rating on the stock with a revised TP of INR1,100 (based on Mar’26E SOTP).