Stocks

Broker's Call: IndoStar (Buy)

| Updated on November 05, 2018 Published on November 05, 2018

R Sridhar, Executive Vice-Chairman, IndoStar Capital Finance, rings the bell to list the firm’s stock on the NSE. File Photo

Centrum Broking

IndoStar

Capital (Buy)

CMP: ₹296.7

Target: ₹450

IndoStar is a non-banking finance company registered with the RBI as a systemically important non-deposit taking company. The company is also into offering vehicle finance and housing finance products through its wholly-owned subsidiary IndoStar Home Finance Pvt Ltd. We retain ‘buy’ on IndoStar Capital with TP at ₹450 (valued at 1.3x FY20E ABV). Q2FY19 results beat our estimates on revenue/ earnings front. Assets under management (AUM)AuM grew 4 per cent q-o-q led by continued traction in high-RoE retail segment (up about 31 per cent q-o-q). Cost/income declined q-o-q; we expect cost ratios to stabilise as phase 1 of branch expansion is in place and productivity gathers pace; capital position remains strong and asset quality intact.

While we see near term RoE remain muted (sub-10 per cent), we remain convinced on the longer term growth story given favourable sector dynamics and growth levers. Valuations at 0.9x FY20E ABV remain attractive.

Lower-than-expected growth / elevated cost remain key risk.

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Published on November 05, 2018
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