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Systematix Report
Tata Capital Ltd. remains Systematix' top pick in the NBFC space with a healthy growth outlook, improving profitability and stable asset quality. The brokerage retains its estimates, which remain 4%/5% above Street expectations, reflecting its confidence in execution capability, gradual margin improvement and stable asset quality.
Systematix continues to value the stock at 2.7x FY28E price/adjusted book value, implying a target price of Rs 400.
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Prolonged margin pressure, higher funding costs, change in growth outlook on account of elevated crude oil prices, regulatory changes around flexi loans and any deterioration in asset quality remain key risks to the brokerage's valuation.
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At the current price, Tata Capital trades at a ~32% discount to CIFC on FY28 book value per share, despite a strong growth trajectory and multiple levers for RoA improvement.
The brokerage sees scope for the valuation gap to narrow as profitability improves and the benefits of the evolving business mix become more visible.
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