Buy Aditya Birla Capital; target of Rs 220: JM Financial

JM Financial is bullish on Aditya Birla Capital has recommended buy rating on the stock with a target price of Rs 220 in its research report dated February 01, 2024.

Broker Research

February 05, 2024 / 15:53 IST

Buy

26 Aug, 2025 12:21

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JM Financial's research report on Aditya Birla Capital

In 3QFY24, Aditya Birla Capital (ABCAP) reported a consol. PAT of INR7.4bn, up 39% YoY,4% QoQ. NBFC business reported a beat in NII of INR 14.6bn (+18% YoY, +8.1% QoQ, +2.5% JMFe) on the back of steady margins (+1bp QoQ) and healthy AUM growth of +5.4% QoQ (despite lower Paytm sourced disbursements). Opex grew +45% YoY, +22% QoQ on account of higher employee costs (+20% QoQ) and other expenses (+26% QoQ) leading to a lower growth in PPoP of INR 11.2bn (+33% YoY, +3.1% QoQ). Credit cost was down -12bps QoQ at 1.63% resulting in a PAT of INR 5.7bn. Mgmt guided to double its loan book in next 3 years while focusing more on retail and SME loans to contribute 75% of total book (vs c.67% currently). Additional capital infusion of INR 8bn (total 16bn out of INR 30n raised by the group) in ABFL led to CRAR of 16.7% (14.5% Tier-1). In housing business, AUM growth was strong at +7.1% QoQ while the margins declined -19bps QoQ leading to sequentially flat (+0.9% QoQ) NII of INR 2.1bn. Higher opex led PPoP to de-grow sequentially by -4.3% QoQ. However, provision write-back of INR 25mn led to a beat in PAT of INR 782mn (+29% YoY, +4.5% QoQ). ABSL AMC saw a total AAUM growth of +11% YoY as the share of equity AUM (+23%YoY) increased to 46% (vs 43% YoY). As of Dec’23, overall AAUM market share (ex ETF) stood at 7.1% (vs 7.9% YoY). ABSL AMC reported PBT of 34bps in 3QFY24 (2bps YoY) as other income improved 3bps over last year. ABSLI outperformed the overall industry in terms of individual APE growth of 8.2% YoY vs 7% for the industry on the back of healthy growth in new business policies sold (17% YoY 9MFY24). Net VNB was up 6.5% YoY to INR 3.45bn for 9MFY24 with net VNB margins up 5bps YoY to 15.6%.

Outlook

We believe NBFC business is now well placed with a strong focus on retailization. Company has also invested in digitization of major operations which will drive operating leverage for the consolidated business as a whole on the back of its One ABC focus. This is likely to augur cross selling opportunities while recent capital raise will play a vital role in tapping the growth going forward. We value ABCL on our SOTP-based valuation to derive a TP of INR 220.

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