AB Capital shares climb 2% on Morgan Stanley's "overweight" upgrade, predicts over 40% upside- Grow Mudra

AB Capital shares climb 2% on Morgan Stanley's "overweight" upgrade, predicts over 40% upside

13 Jan , 2025 By : Debdeep Gupta

Shares of AB Capital rose more than 2 percent to Rs 172 per share on January 13 after Morgan Stanley upgraded the stock to "overweight" from "equal-weight" and set a target price of Rs 247 per share, suggesting an upside potential of over 40 percent from current levels.

Over the past three months, AB Capital’s shares have fallen more than 21 percent, compared to a 7 percent drop in the benchmark Nifty 50 index. Previously, the stock reached a 52-week high of Rs 246 on June 20, 2024.

Morgan Stanley analysts highlighted that AB Capital has managed its asset quality effectively over the years. They projected a 20 percent CAGR in assets under management (AUM) from FY24-27 and an 18 percent CAGR in earnings per share (EPS), leading to a return on equity (RoE) exceeding 15 percent by FY27 for its non-banking financial company (NBFC) business.

AB Capital is a diversified financial services group with operations across multiple sectors, including non-banking finance, housing finance, life insurance, health insurance, asset management, stock broking, wealth services, and asset reconstruction.

Additionally, analysts at Dalal and Broacha recently initiated "buy" coverage on AB Capital, with a target price of Rs 278 per share. They believe the company, under the leadership of Vishakha Mulye, has transformed into a financial powerhouse by leveraging technology to drive significant business growth across its divisions.

The analysts also noted that AB Capital holds a rare AAA rating, which enables it to build higher-rated assets while maintaining strong margins and returns.

With an AUM of Rs 1.14 lakh crore as of Q2FY25, AB Capital has reduced its gross stage 2 and stage 3 non-performing loans to 4.2 percent in September 2024, down from 8.2 percent in June 2022. Dalal and Broacha forecast a 23 percent CAGR in NBFC AUM from FY24-27, with the figure reaching Rs 1.95 lakh crore by FY27. They also expect the company’s profit after tax (PAT) to grow at a healthy 27 percent CAGR during the same period.