Daljeet Kohli, Sharekhan & HDFC Sec Promise More Gains From Capital First

Capital First is a textbook example of how a stock should behave. It has been consistently reporting blockbuster results and obediently met all the targets that have been set out for it.

I reported earlier of how Daljeet has made a packet from Capital First (76% in 6M). Now, Daljeet has issued an update in which he has analyzed Capital First’s Q3FY15 results and increased the price target:

“Stellar performance continues as reported numbers beat our expectations with 35% y-o-y growth in retail credit; upgrade to BUY with revised price target of Rs 460/- (2.2x of FY17E)

CFL’s Q3FY15 result was way above our expectations. CFL’s management has delivered their promises which have yielded in positive results. We believe the current growth momentum to continue over FY14-17E on the back of strong execution capabilities. CFL has emerged as one of the fastest growing NBFCs backed by increasing focus on retail segment. At CMP of Rs 392/-, CFL is trading at P/ABV of 2.1x and 1.9x for FY16E and FY17E respectively. We upgraded our rating to ‘BUY’ from ‘HOLD’ on the stock with revised price target of Rs 460/- (2.2x P/ABV for FY17E) as we roll over valuations to FY17.”

Sharekhan has echoed the same sentiments in its latest research report:

“Strong operating performance, PT revised to Rs 485

Capital First is likely to sustain a strong growth in retail and SME segments and is likely to benefit from a drop in interest rates and revival in consumption. Given the strong management bandwidth and stringent risk management procedures, the asset quality may remain healthy. We expect the earnings to grow at a CAGR of 57% over FY2014-17 and the return ratios to improve significantly from FY2016 onwards. We value the company at 2.5x FY2017E book value which results in a price target of Rs485. We maintain our Buy rating on the stock.”

HDFC Sec has not issued an update because its price target of Rs. 476 has not yet been taken out. In its’ earlier report, HDFC Sec has drawn a comparison between Capital First, Bajaj Finance and Sundaram Finance.

In an earlier interview of November 2014, V Vaidyanathan, CMD, Capital First, asserted that he is confident of achieving 25-30 percent growth over the next 2-3 years.

Now, you have to mull over the data and decide what you want to do.