A foreign brokerage has made a significant move in its assessment of IIFL Finance’s stock, substantially hiking the price target. The new target has been raised by nearly 45%, soaring from the previous ₹380 to ₹550. This upward revision signals a more optimistic stance on the stock’s future performance, potentially attracting the attention of investors looking for promising opportunities in the market.
The brokerage’s positive outlook is grounded in expectations of a recovery in earnings per share (EPS). It anticipates that a resurgence in the microfinance sector, coupled with increased system liquidity and reduced funding costs, will drive this recovery. These factors are seen as key catalysts that could boost the company’s financial performance in the coming period. However, the path ahead is not without hurdles. HSBC, in particular, has sounded the alarm on several potential risks. Intensifying competition in the gold loan segment, declining yields resulting from a contraction in unsecured lending, and escalating expenses pose significant threats to IIFL Finance’s growth prospects. These challenges could potentially undermine the anticipated EPS recovery if not managed effectively.
In light of these various factors, the brokerage has adjusted its earnings per share estimates for the upcoming fiscal years. For FY26, the estimates have been revised downward by 6%, reflecting a more cautious view of the short – term performance. Conversely, for FY27, there is a 0.5% upward adjustment, indicating a slightly more positive long – term outlook. The brokerage values IIFL Finance at 1.5 times its estimated book value per share for FY27. This valuation approach provides a benchmark for assessing the company’s worth in the market. It’s important to note that IIFL Finance recently reported lackluster fourth – quarter results. The company posted a consolidated net profit of ₹38 crore for the period, which represents a sharp 77% decline compared to the ₹165 crore earned in the same quarter last year. This year – on – year slump can be attributed to regulatory challenges faced earlier in the financial year, most notably a temporary ban on its gold loan business. These results underscore the difficulties the company has faced and highlight the importance of overcoming the identified risks to achieve the projected EPS recovery and meet the raised price target.
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