Motilal Oswal is bullish on Piramal Enterprises has recommended buy rating on the stock with a target price of Rs 3685 in its research report dated September 12, 2018.
Motilal Oswal's research report on Piramal Enterprises
FY18 was yet another robust year for Piramal Enterprises (PIEL) with strong growth (69%), ROA/ROE (3.9%+/~20%) and an improvement in asset quality (stage 2/3 loan share at 0.4% v/s 0.9% a year ago). PIEL expects to deliver 2-3% higher ROE in the financial services business driven by benefits from its subsidiaries’ mergers. In the financial services business, banks (57%), mutual funds (32%) and insurance companies (8%) are the largest sources of funding. Around 1/3rd of the borrowing is short-tenured and a mix between floating and fixed rate borrowing is largely equal. From an Asset Liability Management (ALM) perspective, ~90% (largely unchanged YoY) of liabilities mature within three years, while ~58% (~70% in FY17) of assets mature during the same period.
Outlook
PIEL has the distinction of being one of the few companies in India to generate 25%+ book value CAGR over the past 25+ years. We believe the company has it in its DNA to incubate and grow the businesses in niche segments. We believe there is a long runway to cross in the financial services business. Reiterate Buy with a TP of INR3,685 (September-2020 SOTP based).
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