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Geojit Financial
Piramal Enterprises (Buy)
CMP: ₹2,048.45
Target: ₹2,119
Company reported strong topline growth in Q1FY20 (+20.8 per cent y-o-y to ₹3,506 crore). Growth is primarily led by robust performance in Financial Services division (+29.2 per cent y-o-y to ₹2,014 crore), despite liquidity tightening in the NBFC space and overall slowdown across sectors. Total loan book rose 20.2 per cent y-o-y to ₹56,605 crore, while gross NPA ratio stood at 0.9 per cent (63 per cent q-o-q decline in stage 2 assets), maintaining healthy asset quality.
Housing finance loan book improved about 4x times y-o-y to ₹6,110 crore, despite the volatile environment. The company plans to shift its borrowing mix towards long-term source of funds and has raised about ₹18,500 crore of long-term debt since September 2018, while reducing CP exposure to about ₹7,300 crore from around ₹18,000 crore during the same period. Segment ROE came in at 20 per cent.
Valuation: We believe the ongoing growth momentum will continue to support upside potential for the company. We value the stock using (SOTP) valuation methodology (based on P/B for Financials and P/E multiples for other businesses) and rate it a BUY with a price target of ₹2,119.
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