Key facts
- Motilal Oswal Financial Services shares surged over 5% on Friday.
- Global brokerage UBS initiated coverage with a 'Buy' rating.
- UBS set a target price of Rs 1,150, implying a 32% upside potential.
- The company is expected to benefit from India's financialization trend.
- UBS forecasts Motilal Oswal's AUM to grow at a 21% CAGR between FY26 and FY29.
Shares of Motilal Oswal Financial Services experienced a significant surge, rising over 5% to Rs 873 on the NSE. This upward movement followed UBS's initiation of coverage on the stock with a 'Buy' recommendation and a target price of Rs 1,150, suggesting a potential upside of approximately 32% from its current trading level.
UBS highlighted Motilal Oswal's strategic positioning to capitalize on India's ongoing financialization trend, driven by its diversified business across wealth management, asset management, and capital markets. The brokerage anticipates strong growth in assets under management (AUM), particularly in wealth and asset management, benefiting from the projected 18% CAGR for the Indian mutual fund industry and over 20% CAGR for HNI wealth and alternative assets by FY30.
A key factor identified by UBS is Motilal Oswal's transition towards an AUM-led, annuity-style business model, which is expected to enhance earnings stability by reducing reliance on market trading volumes. The firm forecasts AUM expansion at a 21% CAGR between FY26 and FY29, with revenues growing at 19% CAGR and earnings at 22% CAGR during the same period, supported by increasing recurring, asset-based income streams.
UBS values Motilal Oswal using a sum-of-the-parts methodology, applying a multiple of 19 times FY27 estimated earnings. This valuation reflects premium multiples for its asset-light businesses, acknowledging the company's evolving business mix and the growing contribution of fee-based income.