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Motilal Oswal Financial Services Ltd (MOFSL) saw its stock drop 3.45% to Rs 1,210.55 on Wednesday despite strong financial performance in recent quarters.
The stock has given returns of 82.83% year-to-date and 1.15% in the last 5 days. Let’s take a closer look at why MOFSL fell and its growth story.
MOFSL Stock Performance and Valuation
- The stock traded between Rs 1,265.35 and Rs 1,201.30 before closing at Rs 1,210.55.
- This gives MOFSL a trailing 12-month P/E ratio of 8.96x compared to the sector average of 23.04x, making it attractively valued.
- The stock has a beta of 0.82, indicating lower volatility than the overall market.
- MOFSL offers a dividend yield of 0.24%.
Optimistic Analyst Views
- 3 analysts cover MOFSL stock. 2 analysts have a strong buy rating and 1 has a buy rating, indicating strong positive sentiment.
- No analysts have a sell or hold rating on the stock.
Strong Q2FY23 Performance
- MOFSL reported a consolidated net profit of Rs 531.19 crore in Q2FY23, a growth of 67% year-on-year.
- Total revenue grew 15% YoY to Rs 1,345.53 crore.
- The wealth management segment saw profits grow 64% YoY.
- Subsidiaries like Motilal Oswal Home Finance and Motilal Oswal Asset Management also reported strong growth.
Healthy Balance Sheet
- As of Q2FY23, MOFSL had a debt/equity ratio of 1.60x, indicating a manageable debt level.
- Promoter and promoter group holding stands at a high 69.53%, instilling confidence.
- MF holdings were low at 0.02% while FII holding was higher at 6.29% in Sep 2022 quarter.
Positive Industry Outlook
- India’s wealth management industry is expected to grow at a CAGR of 12% from 2022-2027 to reach Rs 539 trillion.
- Increasing financial savings, digital penetration, and rising incomes make it a high growth industry.
- Leading brokerages like MOFSL are well positioned to capitalize on this growth.
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Key Risks
While the long-term outlook is positive, near term risks for MOFSL stock include:
- Market volatility affecting trading volumes and asset management AUMs
- Integration challenges with acquired subsidiaries
- Rising interest rates negatively impacting some loan products
Final Thoughts
Despite the slight drop, MOFSL remains a fundamentally strong stock trading at reasonable valuations. Its leadership in fast-growing segments like broking and wealth management, combined with a healthy balance sheet, make it well positioned for long-term growth. Investors should conduct further research before making any investment decision.