Recommendation from Finance-General Sector

Recommendation from Finance-General Sector

This section gives a recommendation of a stock having stock price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon. 

Edelweiss Financial Services : Making Sound Financial Sense 

HERE IS WHY
βœ“ One of the fastest growing financial companies
βœ“ Strong growth in AUM
βœ“ Steady performance across businesses

Edelweiss Financial Services offers a broad range of financial products and services to a diversified client base which includes individuals, corporates and institutions. The company has a strong client base of 5 million and has added 2 million customers in a year. It is also the second largest non-bank wealth manager in India. The company has a presence in three categories: credit business that services both retail and corporates; franchise and advisory which include wealth management, asset management and capital markets; and life and general insurance.

The company reported net sales of Rs 9,357 crore in FY21 compared to Rs 9,860 crore in FY20. That is de-growth of nearly 5.1 per cent. The operating profit stood at Rs 3,980 crore in FY21 as against Rs 2,336.4 crore in the previous year. That is a growth of over 70.3 per cent. Also, the PAT stood at Rs 254.6 crore while it had recorded a net loss of Rs (2,044) crore in FY20. The cash flows from operating activities decreased from Rs 12,098 crore in FY20 to Rs 3,458 crore in FY21, which declined by 71 per cent. The company added approximately 3 lakh customers in Q2FY22. Total income for the quarter ended September 2021 stood at almost Rs 1,821 crore. That’s a growth of 11.5 per cent on QoQ basis but de-growth of 18 per cent on YoY basis.

The net profit number stood at Rs 29 crore, which increased by 613 per cent QoQ and a rise of 152 per cent YoY. The profits were driven by the strong performance of asset and wealth management segments. There has been significant growth in mutual fund AUM and alternative asset management AUM. 

The total AUM has crossed the Rs 1 lakh crore mark in Q2FY22. The company continues to invest in its insurance segment and the management expects increased profitability in the coming quarters. In life insurance, the gross premiums registered a growth of 59 per cent and in general insurance it witnessed a rise of 52 per cent over the previous quarter.

The credit business has witnessed good traction in the quarter. The disbursements in retail have picked up and the company has also started co-lending with banks. Also, the asset reconstruction segment of the company, known as ARC, has had a robust quarter. The recovery-focused strategy in the business has made Edelweiss Financial Services a leader in the segment. The stock is trading near the low PE level of 11.2. The stock has a price-to-book multiple of 1.07. The company has a ROE of 4.07 per cent and ROCE of 10.23 per cent. Going ahead, the company is looking forward to the demerger and listing of Edelweiss Wealth Management.

The demerger is expected to unlock some value for its shareholders. The company is also focused on reducing its wholesale credit assets as it has already brought down the assets from about Rs 10,695 crore in September 2020 to Rs 4,900 in September 2021. Improvement in reduction of wholesale credit assets is expected over the next two years as the pandemic’s impact subsides. This private player has a strong balance-sheet and has been increasing equity and liquidity by ensuring robust governance. By virtue of all these factors, we recommend our reader investors to BUY the scrip.


 

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DALAL STREET INVESTMENT JOURNAL - DEMOCRATIZING WEALTH CREATION

Principal Officer: Mr. Shashikant Singh,
Email: principalofficer@dsij.in
Tel: (+91)-20-66663800

Compliance Officer: Mr. Rajesh Padode
Email: complianceofficer@dsij.in
Tel: (+91)-20-66663800

Grievance Officer: Mr. Rajesh Padode
Email: service@dsij.in
Tel: (+91)-20-66663800

Corresponding SEBI regional/local office address- SEBI Bhavan BKC, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400051, Maharashtra.
Tel: +91-22-26449000 / 40459000 | Fax : +91-22-26449019-22 / 40459019-22 | E-mail : sebi@sebi.gov.in | Toll Free Investor Helpline: 1800 22 7575 | SEBI SCORES | SMARTODR