Piramal Enterprises shares slip 5% as Jefferies cuts target price post Q2 earnings

Global brokerage firm Jefferies has cut its target price on Piramal Enterprises Ltd (PEL) to ₹855 with an 'Underperform' recommendation due to reported profit before tax (PBT) below its estimates. The stock tumbled 5% to hit a day's low of ₹935.45 apiece on Friday (November 10). At 11:40 am, the scrip was down 4.45% to trade at ₹942.50 on the NSE.

In a report, Jefferies said the net interest margin (NIM) improved quarter-on-quarter due to loan mix changes and stable asset quality but the low-interest earning assets and elevated operation expenditure should cap return on assets (ROA).

"The non-interest bearing assets driving lower yields overall, sticky opex, and a one-off ₹64 crore loss on account of refund to the India Domestic REIT PMS investors drove the miss in PAT, for the quarter," according to Emkay Global.

Beyond the short-term irritants on Piramal's journey, Emkay believes the company is making significant progress and the current valuation remains attractive.

"Piramal is in for the long haul, to establish itself as a leading retail and wholesale lender, with sustained profitability," it said suggesting a 'Buy' rating on the counter. However, the brokerage has revised its target price down to ₹1,180 per share.

Factoring-in the September quarter developments, Emkay has revised its FY24 to FY26 estimates, resulting in an EPS (earnings per share) cut of 20% for FY25-26, led by NII (net interest income) cut and decrease in income from joint ventures and associates.

Meanwhile, analysts at JM Financial have a target of ₹1,250 on the counter, saying that strategic changes at key leadership positions, strengthening of the risk standards and meaningful process improvements should ensure gradual improvement in growth and profitability.

Diversified group Piramal Enterprises posted a profit of ₹48 crore for the second-quarter and its revenue grew 16% on-year to ₹2,193 crore during the same period. Total income of the company also rose 13% to ₹2,205 crore for the quarter under review.

The NBFC's (non-banking financial company) gross non-performing assets (GNPA) ratio for the quarter fell to 2.7%, around 10 basis points lower while the net NPA ratio during the period was flat at 1.5%.

The company's total assets under management (AUM) rose 4% quarter-on-quarter and 5% on-year to ₹66,933 crore.

The NBFC also completed a share buyback of ₹1,750 crore during the quarter.