Piramal Enterprises Q1 Review: CLSA, Citi Raise Targets, But Warn Of Risks — Should You Buy, Sell Or Hold?
CLSA maintained a 'hold' rating on the Piramal Enterprises stock but raised the target to Rs 1,200 from Rs 1,030.
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Piramal Enterprises Ltd. received two share price target hikes from notable brokerages after it reported the first quarter financial results.
CLSA maintained a 'hold' rating on the stock but raised the target to Rs 1,200 from Rs 1,030. Citi also kept the 'Sell' rating on Piramal Enterprises and hiked the target to Rs 950 from Rs 800. Both indicate a potential downside to the stock over the previous close.
Besides, Jefferies has an 'underperform' rating on the stock with a target price of Rs 1,000.
Piramal Enterprises is a diversified NBFC, with presence across retail lending, wholesale lending, and fund-based platforms.
Piramal Enterprises Q1 Recap
Total income up 19.8% to Rs 2,693.5 crore versus Rs 2,249.1 crore.
Net profit up 52% to Rs 276.4 crore versus Rs 181.5 crore.
Net interest income rises 23% to Rs 901.7 crore versus Rs 732.4 crore.
Q1 Review
Analysts at CLSA said Piramal Enterprises' Q1 performance was mixed, marked by both stability and areas of concern. While the company has demonstrated strong Asset Under Management (AUM) growth, they noted emerging stress in the MSME and small-ticket Loan Against Property (LAP) segments.
Despite a sequentially weaker operating profit, net profit was supported by lower credit costs. Furthermore, the retail segment's gross stage 3 (GS3) assets increased by 20 basis points, with unsecured MSME and used car finance identified as particular problem areas, CLSA said.
Citi noted that tweaks to its Expected Credit Loss (ECL) model have eased credit costs, leading to a reduced provision cover, even as gross Non-Performing Assets (GNPA) inched up.
The brokerage highlighted a deterioration of risk quality, particularly in unsecured MSME and used car financing segments. Citi suggests that a modest Return on Equity (RoE), potential haircuts on legacy AUM, and persistent volatility will likely continue to weigh on the company's valuation.
Shares of Piramal Enterprises closed flat at Rs 1,295 apiece on the NSE on Tuesday, ahead of the results, compared to a 0.57% rise in the benchmark Nifty. The stock has risen 25.76% in the last 12 months and 17.23% on a year-to-date basis.
