Piramal Enterprises Shares Fall After Profit Miss, Target Price Cuts
Piramal Enterprises reported a net profit of Rs 137 crore in the quarter ended March 2024, compared with Bloomberg's estimate of Rs 1,013 crore.
Shares of Piramal Enterprises Ltd. fell on Thursday after its fourth-quarter profit missed analysts' estimates by a wide margin, prompting most brokerages to cut both ratings and target price on the stock.
The company reported a net profit of Rs 137 crore in the quarter ended March 2024, compared with a loss of Rs 196 crore a year earlier, according to an exchange filing. The consensus estimate of analysts polled by Bloomberg pegged net profit at Rs 1,013 crore.
Piramal Enterprises Q4 Results Highlights: (Consolidated, YoY)
Revenue up 16% at Rs 2,473 crore. (Bloomberg estimate Rs 852.55 crore).
Net profit at Rs 137 crore versus loss of Rs 196 crore (Bloomberg estimate Rs 1,013 crore in profit).
Board recommends final dividend of Rs 10 per share.
Motilal Oswal, a brokerage firm, slashed the stock's target price to Rs 925 per share from Rs 1,100 per share earlier, downgrading it to 'neutral' from 'buy'. Citi Research also cut the target price to Rs 720 apiece from Rs 850 apiece earlier while maintaining a 'sell' for the stock.
"Pockets of opportunity, which we earlier thought would be utilised for some inorganic acquisition in retail businesses or for strengthening the balance sheet, are being utilised to rundown the stressed legacy AUM," said Motilal Oswal. "We do not see catalysts for any meaningful improvement in the core earnings trajectory of the company."
"Modest RoE, legacy AUM haircut, persistent volatility, and merger transition will weigh on valuation," according to Citi Research.
The company has also announced the merger of Piramal Enterprises with its subsidiary, Piramal Capital & Housing Finance. Piramal Finance will be the new name of the merged entity.
While Motilal Oswal believes that this is a step in the right direction to simplify the organisation structure, Citi Research noted that the company's management has guided a 2.5% one-time impact due to the transition, after which the merged entity's pro forma capital-to-risk (weighted) asset ratio would be over 25%.
Brokerage firm Emkay, which maintained its 'add' rating and price target of Rs 1,000 apiece, said, "Overall, PIEL remains a work-in-progress retail and wholesale lending franchise, with legacy pain now mostly behind; steering towards 3% sustainable RoA is likely to be a 3–4 year voyage."
Shares of the company fell as much as 6.38% to Rs 838 apiece, the lowest level since April 22. It pared gains to trade 4.49% lower at Rs 855 apiece as of 10:25 a.m. This compares to a 0.63% decline in the NSE Nifty 50 Index.
The stock has fallen 4.44% on a year-to-date basis and 8.20% in the last 12 months. Total traded volume so far in the day stood at 1.64 times its 30-day average. The relative strength index was at 41.75.
Out of the seven analysts tracking the company, two maintain a 'buy' rating, two recommend a 'hold,' and three suggest 'sell,' according to Bloomberg data. The average 12-month consensus price target implies an upside of 4.4%.
