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    Fundamental Radar: This NBFC multibagger could hit fresh record highs in 2023; time to buy?

    Synopsis

    Post-acquisition of Magma Fincorp, the Poonawalla group has strengthened its leadership team, accompanied by reorientation of the customer mix, realignment of the product suite, and implementation of stringent credit policies.

    Fundamental Radar: This NBFC multibagger could hit fresh record highs in 2023; time to buy?Getty Images
    Poonawalla Fincorp, part of the NBFC space, formerly known as Magma Fincorp has rallied more than 400% in the last 3 years and with a focus on sustained profitability, the stock could hit fresh record highs in 2023, suggest experts.

    Brokerage firm Motilal Oswal initiated coverage on Poonawalla Fincorp (PFL) with a buy rating and a target price of Rs 350 which translates into an upside of about 16% from Rs 303 recorded on 2 January 2023.

    The NBFC stock hit a fresh record high of Rs 343 on 13 April 2022, but it failed to hold on to the momentum. The stock bounced back after hitting a low of Rs 209 on 20th June 2022.

    Post-acquisition of Magma Fincorp, the Poonawalla group has strengthened its leadership team, accompanied by reorientation of the customer mix, realignment of the product suite, and implementation of stringent credit policies.

    Poonawalla Fincorp is one of top buys in NBFC space, says Sneha Poddar

    "Post-acquisition of Magma Fincorp, the Poonawalla group has strengthened its leadership team, accompanied by reorientation of the customer mix, realignment of the product suite and implementation of stringent credit policies," Sneha Poddar, Associate Vice President at Motilal Oswal Financial Services Limited, said.

    Sneha Poddar, Associate Vice President at Motilal Oswal Financial Services highlights 4 factors why Poonawalla Fincorp is a top buy in the NBFC space:

    Huge market opportunity:
    Poonawalla Fincorp has a huge market opportunity, given its focus on consumer and small business finance. It has a lean branch network and a standalone AUM of Rs 132 billion (September 2022).

    Better credit-quality customers:
    With new promoters on board, it was able to achieve credit rating upgrades that resulted in a significant decline in the cost of borrowings with a better and more diversified liability mix.

    This enabled PFL to refocus on better credit-quality customers and realign its product suite to generate superior risk-adjusted returns.

    Sustainable Profitability:
    We expect the early green shoots to become visible within the next 3-6 months, given PFL has laid down a robust foundation for sustainable profitability.

    Valuations:
    “We estimate an AUM/PAT CAGR of 37%/~65% over FY22-FY25E, respectively. We forecast an RoA/RoE of 4.8%/~12% in FY25E,” said Poddar. The brokerage firm has a 12-month target of Rs 350 on the stock.

    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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