Private Client Research

Rating

Buy

Sector

Finance - Capital Markets

Company

Motilal Oswal Financial Services Ltd

Finance - Capital Markets

June 24, 2020

Sensex: 34868.98

CNX Nifty: 10305.30

NSE: MOTILALOFS

BSE: 532892

Reco Price

Rs. 604.00

Price Target (3 - 6 Months)

Rs. 755.00

Upside

25.00%

Date

June 24, 2020

Sensex

34868.98

CNX Nifty

10305.30

Exchange

Code

NSE

MOTILALOFS

BSE

532892

Stock Data

CMP (Rs)

585.00

Face value (Rs)

52 Week Range (Rs)

905.40 - 426.00

Market cap (Rs Crores)

8651.53

Price To Book Value (x)

2.92

P/E Ratio (x)

49.20

EV/EBIDTA (x)

16.41

One Year indexed Stock Performance

Motilal Oswal Financial Services Ltd Sensex

Return (%)

12m

36m

Absolute

15.70

-20.07

-13.70

-47.27

Sensex

13.92

-15.90

-10.87

12.63

Shareholders

(in %)

31-Mar

Promoter

69.76

Public

30.24

Others

0.00

Total

100

+91 22 6639 3000

research@stockaxis.com

Profile

Motilal Oswal Financial Services Limited (MOFS) is a non-banking financial company (NBFC), registered under the Reserve Bank of India Act, 1934. MOFSL is a diversified financial services company with fee based and lending business activity. MOFSL operates in businesses such as Retail and Institutional broking, Investment banking, Asset Management, Wealth Management, Private equity and Housing finance. In each of the businesses, MOFSL offers unique value proposition to its customers and creates its niche in each of the business segments and commands premium position over peers. MOFSL carries its lending business by running Loan against shares book and retail mortgage backed lending in affordable housing segment under the name of Motilal Oswal Home Finance Ltd.

Asset Management the future growth engine

Investment Thesis:

Emerging Asset Management Business:
Motilal Oswal Asset Management (MOAMC) operates PMS, AIF and MF in the public equities space. MOAMC has crafted its niche with majority of AUM in equities. We do not foresee any material impacts on MOAMC’s business because of slab wise reduction in Total Expense Ratio (TER), as its AUM is well positioned with 50% of it consisting of alternative assets like PMS and AIFs. Also, majority of the impact has been passed on to the distributors.

New fund launches to scale AMC business:
MOAMC has recently launched 4 index funds MO-Nifty 500, MO-Nifty Bank, MO-Nifty Mid-Cap 150, MO-Nifty Small-Cap 250, these are India’s 1st of its kind retail focused passive funds. These index funds provide easy, economical and effective way of investing to the customers.

MOAMC in Q2FY20 has launched new fund offer (NFO) of open-ended scheme under active category, MO-Large and Mid-Cap Fund with a blend of large and mid-cap stocks for the customers seeking long term capital appreciation.

Turnaround of Housing Finance business
The name alignment to ‘Motilal Oswal’, strong capital support from MOFS, promoter group’s stated commitment and increased involvement toward ‘Motilal Oswal Home Finance’ (MOHF), along with demonstrated operational, managerial and financial support, bring huge synergy benefits to MOHF. Benefits are already visible with rating agencies upgrading their ratings for the home finance business. Top management has now been revamped with a new CEO, CFO, CRO and teams for collections, legal and technical. Home finance business has seen strong turnaround in H2FY20, new loan book having zero NPAs, strong recoveries and upgrades is seen from written-off pool.

Focus on Branding
MOFS has significantly invested in branding and advertising in the past few years and the same has started realizing benefits in terms of brand-recall in the long term. Their tag line of ‘Think Equity. Think Motilal Oswal’, ‘Buy Right Sit Tight’, ‘Think Equity. Think QGLP’ and ‘At Motilal Oswal we’ve spent 30 years focusing only on Equity’ have been gaining traction among customers.

Technical

"Consolidation phase going on”

Price: Motilal Oswal is trading above its all the important moving average, 21EMA & 50EMA on daily chart. The daily chart is suggesting a consolidation pattern and stock is ready for northward direction. The stock has high of Rs.905.40 made on 13 January 2020 and move down from that level till low of Rs.426 made on 25 March 2020. Drawing Fibonacci Retracement between this level the stock is trading in range of 23.60% retracement, which has a values of Rs.539.80 and 50% retracement, which has a value of Rs.610.80. The stock has bounced from the support level with increased in volume which indicates the strength in the counter.

Indicator: The stock is trading above keen moving average (21EMA&50EMA) on daily chart, which indicates bullishness for this stock. The Parabolic SAR on daily chart is trading below the price, indicating upward momentum is likely to continue in the stock. On the daily charts stock is trading above the upper band of Bollinger Band (20, 2) with a positive bias. The RSI on daily chart is pegged at 60.78, still trading in higher lows which show the bullish sign for the stock. Even the MACD is trading above the signal in buy territory on daily chart, indicating positive momentum in the stock in the near term.

Volume: Price and volume analysis plays an important part in determining overall strength or weakness in the stock. Price and volume pattern are moving in the same direction which reflects the true movements in the stock. This still shows the movement of this stock, is on bull side. MOTILAL OSWAL volume has been gradually increasing along with the price and near the support and demand levels this confirms the overall strength and bullishness in the stock.

Conclusion: Considering all the above data facts, we recommend buying for short to medium term. The stock has seen decent deliverable quantity to trade quantity on daily basis, which indicates strong hands are accumulating the stock at currents levels, which enhance the confidence over the stock. Traders may go long on the stock around Rs.604 levels keeping a stop loss below Rs.513 for target of Rs.755.

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