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Emkay Global Financial’s research report on Aditya Birla Capital
Our positive view on the stock is underpinned by three factors: 1) The lending business (NBFC and HFC) has hit upon the right business model (categories, acquisition channel and unit economics), with a right to win. This will manifest into an impressive 26% loan-book CAGR, supporting a similarly sturdy 31% profit CAGR through to FY25E. 2) The Life Insurance business has withstood regulatory shocks and now owns a diversified distribution channel, which will focus on driving growth beyond urban centers. We estimate 20% VNB margin, with industry-leading growth. Likewise, the company’s AMC business maintains dominance (is in the top-tier) and is favored by the notably cyclical movement in market share. Health Insurance remains in a growth phase. 3) The most vital trigger, in our view, remains the dynamism of the new management, which indeed intends to capitalize on its “low cost liability” edge and its right to win, together with shedding its ultra-conservatism on growth (not risk). Despite the higher growth in insurance businesses putting some strain on reported profit, we see consolidated PAT clocking ~30% CAGR over FY22-25E to reach Rs33bn.
Outlook
We initiate coverage on Aditya Birla Capital (ABCAP) with a BUY recommendation and Mar-24E TP of Rs200/share (+29% upside), based on SOTP-based valuation methodology.
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Aditya Birla Capital - 06 -03 - 2023 - emkay