Non-banking financial company (NBFC) Ujjivan Financial Services has given multi-bagger returns to its investors in the last one year. The stock has surged over 125 percent in this period as against a 16 percent rise in benchmark Nifty50.
Meanwhile, from its all-time low of ₹97.60, hit in February 2022, the stock has advanced over 3 times or as much as 228 percent to currently trade around ₹320 (as on May 16, 2023).
Just in 2023 YTD, the stock has gained 20 percent, rising 18.5 percent in May itself. Meanwhile, it also rose around 10 percent in April. However, during the first 3 months of the current calendar year, the stock was in the red. It fell 4 percent in Jan, 0.7 percent in Feb and 3.2 percent in March.
The stock touched a 52-week-high of ₹334.80 on May 16, 2023, while it hit its 52-week low of ₹120.55 on June 27, 2022.
The company has not yet declared its results for the March quarter of FY23 (Q4FY23). Meanwhile, in the December quarter (Q3FY23), the firm turned profitable, reporting a consolidated net profit of ₹297.98 crore as compared to a loss of ₹181.56 crore in the same period last year. Its net interest income for the quarter under review surged 62.6 percent YoY to ₹1121.16 crore versus ₹689.27 crore in the corresponding quarter last fiscal.
Despite the exceptional returns in the recent past, brokerage house HSBC sees further upside in the stock going ahead. In its recent report, the brokerage retained its buy call on the stock on the back of attractive valuations with a target price of ₹430, indicating an upside of around 35 percent.
"Ujjivan is on track to complete the reverse merger with its subsidiary Ujjivan Small Finance Bank (USFB) by September 2023. In FY23, USFB’s performance improved substantially, as it improved its loan growth and margins and reduced its cost ratios. GNPA and restructured portfolios are well provided for, the forward flows into stressed loans have reduced, and collection efficiencies are strong. USFB is now likely to focus on its long-term strategy of AUM diversification, and improve its distribution and deposit franchise. As a result, its parent, Ujjivan, is likely to report strong financial performance as well," rationaled the brokerage.
However, 1) lower-than-expected loan growth; 2) an inability to attract deposits to the expected levels; 3) higher-than-expected borrowing costs or lower-than-expected loan pricing due to competitive pressures; 4) higher-than-expected cost pressures; 5) higher-than-expected credit costs, as 73 percent of the portfolio is MFI; and 6) loss of key management personnel are key risks, warned the brokerage.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
