Business Standard

Prabhudas advises investors to be selective on NBFC shares

Expensive valuation, asset quality risks may limit stock performance

Somasroy Chakraborty  |  Kolkata 

Investors must be selective while buying shares of non-banking finance companies (NBFCs) as valuations no longer appear inexpensive while risks of asset quality deterioration persist due to weak macro-economic environment.

"Frontline NBFCs are not cheap anymore. Most NBFCs have shown strong stock performance and valuations on some names are getting demanding now," Adarsh Parasrampuria and Parul Gulati, analysts with brokerage Prabhudas Lilladher, said in their note to clients on Monday.

The brokerage has downgraded its ratings on and Housing Development Finance Corporation (HDFC) to 'accumulate' from 'buy' as their current share price do not leave room for further upside. It considers Finance's valuation reasonable but advised caution as the commercial vehicle cycle and freight rate movements do not appear encouraging.

While the recent run-up in Mahindra Finance's share is likely to restrict near-term stock performance, it remains the preferred investment option for in the NBFC space. It expects the company to surprise investors with superior margin and higher growth.

In commercial vehicles, while the asset quality has remained stable latest freight rate data and feedbacks indicate that rates have corrected by 4-5% post the festive season. Freight availability has also come off, the brokerage noted.

Car pool collections continue to remain strong and the collection rates for microfinance pools securitised are running at 99.9%.

RECOMMENDED FOR YOU

Prabhudas advises investors to be selective on NBFC shares

Expensive valuation, asset quality risks may limit stock performance

Investors must be selective while buying shares of non-banking finance companies (NBFCs) as valuations no longer appear inexpensive while risks of asset quality deterioration persist due to weak macro-economic environment.

Investors must be selective while buying shares of non-banking finance companies (NBFCs) as valuations no longer appear inexpensive while risks of asset quality deterioration persist due to weak macro-economic environment.

"Frontline NBFCs are not cheap anymore. Most NBFCs have shown strong stock performance and valuations on some names are getting demanding now," Adarsh Parasrampuria and Parul Gulati, analysts with brokerage Prabhudas Lilladher, said in their note to clients on Monday.

The brokerage has downgraded its ratings on and Housing Development Finance Corporation (HDFC) to 'accumulate' from 'buy' as their current share price do not leave room for further upside. It considers Finance's valuation reasonable but advised caution as the commercial vehicle cycle and freight rate movements do not appear encouraging.

While the recent run-up in Mahindra Finance's share is likely to restrict near-term stock performance, it remains the preferred investment option for in the NBFC space. It expects the company to surprise investors with superior margin and higher growth.

In commercial vehicles, while the asset quality has remained stable latest freight rate data and feedbacks indicate that rates have corrected by 4-5% post the festive season. Freight availability has also come off, the brokerage noted.

Car pool collections continue to remain strong and the collection rates for microfinance pools securitised are running at 99.9%.

image

LIVE MARKET

BSE

  ( %)

NSE

  ( %)

Widgets Magazine

More News

STOCK WATCH

Company Price() Chg(%)
Ramkrishna Forg. 367.80 10.04
Idea Cellular 110.00 9.07
C P C L 157.20 8.41
Tata Motors 298.65 8.34
Bharti Infra. 384.55 8.29
> More on BSE Gainers
Company Price() Chg(%)
C P C L 157.15 8.64
Geojit BNP 32.10 8.63
Idea Cellular 109.65 8.40
Tata Motors 298.35 7.96
Bharti Infra. 384.10 7.89
> More on NSE Gainers
Company Price() Chg(%)
Bliss GVS Pharma 124.40 -19.97
B H E L 104.55 -13.13
Wockhardt 760.80 -13.09
Just Dial 417.45 -12.47
S C I 57.80 -9.97
> More on BSE Gainers
Company Price() Chg(%)
B H E L 104.45 -13.14
Wockhardt 762.10 -13.11
Just Dial 415.35 -12.54
SE Investments 165.55 -12.20
Cox & Kings 158.85 -10.25
> More on NSE Gainers
Widgets Magazine
Widgets Magazine
Widgets Magazine

Derivatives

Index
Instrument Type
Expiry Date
Option Type
Strike Price