Trust MF to launch flexi-cap NFO today
Two years after its launch, Trust Mutual Fund has launched its first equity scheme on Flexi Cap with the concept of terminal value investing to deliver best possible long term returns to investors.
The NFO will open for subscription between April 5 and 19.
As part of terminal value investing, the fund house will identify mega trends and spot the right company based on 1015 years earning potential rather than the industry practice taking investment call based on 35 years data.
Once the long term earning potential is derived, investments are made even if the valuation of stock has turned pricey in the shortterm.
VALUE INVESTING
Mihir Vora, Chief Investment Officer, Trust Mutual Fund, said the fund house believes in Terminal Value Investing framework and Growth at Reasonable Valuations approach offers a differentiated alternative for equity fund investors.
GARV is an investment approach that looks at identifying stocks with strong growth potential at reasonable valuations which will enable the fund to adapt and navigate through various market conditions for sustainable investment success, he said. Flexicap fund will filter in 200250 stocks from a universe of 9001000 growthoriented companies and prepare a portfolio of 4060 stocks.
Sandeep Bagla, CEO, Trust Mutual Fund, said though the markets have hit a new high the valuations are at a reasonable level given the growth potential and investors should not be worried about shortterm market rally.
Macquarie AB CAPITAL (OUTPERFORM)
Target: ₹230
CMP: ₹205.55
We believe Aditya Birla Capital (ABCL) is poised to show strong growth in loans and earnings driven by its lending (NBFC and HFC) and savings (life insurance) businesses in the next several years. The moats here are: strong parentage and AAA rating providing access to competitive funding; leveraging the ABG group and ABCL ecosystem for crossselling and upselling in NBFC, insurance, and other segments; diversified product suite and distribution mix avoiding concentration risk in terms of product segment dependency (strong AUM CAGR despite scale down of personal loans). In our view, the SME segment, in particular, is expected to show a strong over 30 per cent AUM CAGR over the next three years; and strong senior leadership providing confidence on underwriting and asset quality.
We value ABCL at a TP of ₹230 using a sumofparts methodology. About 85 per cent of our SOTP is derived from NBFC (1.9x FY25F BV), HFC (1.4x FY25F BV) and life insurance business (FY24FEV+15x FY25F VNB).
We also attribute a 20 per cent holding company discount to listed subsidiaries ABSL AMC and Aditya Birla Money. We factor in no discount for ABFL on account of the merger announced with the listed ABCL.
Elara Securities MUTHOOT FINANCE (BUY)
Target: ₹1,948
CMP: ₹1,664.85
Muthoot Finance is in a sweet spot, given robust growth prospects backed by sound fundamentals and sectoral tailwinds. Fundamentals are underscored by proven moats of leadership and higher productivity (AUM per branch at ₹14.50 crore vs ₹8 crore for IIFL Finance and a mere ₹5.6 crore for MGFL), steadystate branch and customer expansion, customer segmentation with limited share of 27 per cent in the above ₹3,00,000 ticket size which faces rising competition and increased thrust on marketing & digital initiatives along with enhanced customer service to strengthen Muthoot’s competitive positioning.
We believe high productivity and staunch distribution network can add about 3 per cent to AUM growth annual basis.
Sectoral tailwinds, such as continued momentum in underlaying asset value like gold, concerns regarding unsecured, systemic credit expansion fuelling MSME credit via gold loans, less competition from banks with unit economics turning unfavourable amid tight liquidity will enable MUTH to reclaim its market positioning. We revise 14 per cent growth to 15 per cent + during FY2426.
Muthoot is poised to reclaim strong market positioning in the gold finance space. Continued rise in gold prices and tight liquidity scenario for banks are leading to healthy business traction.