ICICI Direct Places Buy On Midcap Financial Stock, Can Give 32% Return, Recommends Dividend

ICICI Direct initiates Buy on JM Financial Ltd. (JM) with a positive view. The brokerage assigns a target price of Rs. 95 apiece, claiming a potential upside of up to 32% if purchased at the current market price. JM is a midcap financial services sector company. It has a market capitalisation of Rs. 6,869.81 crore.

Final Dividend

On May 09, 2023, the Board recommended a final dividend of Re. 0.90/share for the financial year 2022-23.

According to the Board of Directors of JM Financial Ltd, "Recommended a final dividend of Re. 0.90 per share for the financial year 2022-23."

Pick up in lending business; non-lending to act as catalyst driving valuation...

According to the brokerage firm, Despite challenges during Covid, JM delivered a gradual recovery in performance with improvement in both business growth and asset quality. Though some business segments continue to remain cyclical, the performance excluding one-offs (provision in ARC business, investment in AWS business) remains encouraging.

"Further, we believe the overall performance will improve given 1) pick-up in lending business with AUM growth expected in the 15-18% range; 2) improvement in recoveries in ARC business with minimum probability of substantial provisioning ahead; 3) recovery in investment banking revenue with focus continuing on wealth and asset management pie. Thus, we expect revenue to grow at ~14% CAGR in FY24-25E to Rs. 4327 crore while the earnings trajectory is seen staying healthy at 18.3% CAGR to Rs. 837 crore in the same period. Demerger of the business after it attains adequate scale stays a catalyst for unlocking value. However, we have not factored this in our valuation," the brokerage has said.

It added, "Given the diversified business segment, we value JM using SOTP valuation and valuing business segments individually, we arrive at a target price of Rs. 95 (10.7x FY25E consolidated EPS) and assign BUY rating to the stock. We expect a gradual pick-up in business momentum and earnings trajectory with the same getting reflected in valuation."

Stock Outlook

The stock last traded at Rs. 71.95 apiece on NSE. It declined 2.7% in 1 week. However, it has surged 9.02% in 1 month and 16.52% in 3 months, respectively. It gave 17.85% positive return in 1 year. It has given 3.29% negative return in 3 years, and 45.49% in 5 years, respectively.

About - JM Financial Ltd.

JM Financial (JM) is a diversified financial group engaged in various businesses providing a host of services including mortgage lending (wholesale and retail), distress asset management (ARC), investment banking, wealth management & securities (AWS) and AMC. On a consolidated basis, JM reported revenue at Rs. 3343 crore and PAT at Rs. 597 crore. The outstanding advance book was at Rs. 15653 crore while ARC AUM was at Rs. 13558 crore.

Disclaimer - The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.