Stocks to buy today | Jefferies India stock recommendations: Aditya Birla Capital shares have remained in the green territory despite pressure in the stocks-listed at the key indices — Nifty 50, Sensex, and Bank Nifty throughout the year. Aditya Birla Capital share price has risen around 30% in one year, whereas it is up around 5.50% in YTD. However, Jefferies India is still bullish on the NBFC stock and sees 25% more upside with a target price of ₹475. Aditya Birla Capital share price today is around ₹382 per share.
Giving rationale behing the ‘buy’ tag being given to the Aditya Birla Capital shares, the Jefferies India report said, “Aditya Birla Capital Ltd should benefit from rising rates as 70% floating-rate assets and 56% floating liabilities support NIM expansion. AUM should grow at 26% CAGR over FY26-28e, led by healthy momentum in unsecured and steady growth in secured loans. Fee income risks from proposed tighter insurance commission norms are lower than peers. Benign unsecured environment and limited rural exposure should keep AQ steady. At 1.8x FY28e BV, valuations seem reasonable.”
The global investment bank report said that ABCAP's margin has dipped 15bps since 4QFY25 despite a 330bps rise in mix of higher-yielding unsecured loans, in contrast to market expectation of NIM expansion on rising unsecured mix. We think yield compression in secured MSME and wholesale loan book (70% of the book) due to lower rates offsets mix gains. ABCAP’s secured MSME (ATS Rs14mn) and wholesale (ATS Rs760mn) target large-ticket segments that compete with banks and thus are anchored to bank lending rates (price setter in these segments) like prime housing loans. Avg standalone NBFC yields thus fell 60bps through the recent easing cycle despite rising unsecured mix.
“As banks reprice loans in these segments following rate hikes, portfolio yields in these segments should improve; CoF should rise, too, but gradually, given 56% floating-rate liabilities. We expect NIMs to expand 13 bps over FY27-28E,” Jefferies India report said.
“We expect ABCAP's AUM to increase at a 26% CAGR over FY26-28, supported by sustained momentum in unsecured consumer and MSME BL, steady growth in its secured MSME and wholesale loans, and scaling up of its new gold loan portfolio. ABCAP plans to add 1,000 gold loan branches over next 3 years (200-300 in FY27). With insurance commissions at only c.3% of total FY27e PBT (FY26), fee income risks due to proposed tighter insurance commission norms should be lower than most peers,” the Jefferies India report added.