With BSE Sensex and Nifty moving ahead towards record levels due to increased domestic investor interest, some broking houses are also showing better topline and bottomline growth. The better performance may be due to increased mutual fund business and also Systematic Investment Plans (SIP) rather than increase in equity trading.
Yield on mutual fund distribution is reportedly better than brokerage income, while most broking firms are also shifting to the wealth management business to attract more clients. With improved market sentiment created by gains in global economic growth, global markets, better quarterly earnings expected for the remaining part of the financial year, broking firms are indeed better positioned to report strong financial growth.
Amidst the positive sentiments in the market, here is a look at the prospects of major players:
Geojit Financial Services Ltd (BSE: 532285 NSE: GEOJITFSL) Category: Mid Cap
Geojit Financial Services was set up in 1987 by C J George and Ranajit Kanjilal and has now become a leading financial services provider with a growing presence in Middle East. The services provided include equities, derivatives, commodity and currency futures, mutual funds, life and general insurance and financial planning.
Assets under management went up by 18.5% annualised at Rs 350 bn and Depository Assets (Assets Under Holding) at Rs 302 bn. Book size of mutual fund SIP has grown at a robust rate of 172% annualised at Rs 1.26 bn. Equity income constitutes 67% of operating income and was up 2% in September quarter at Rs 61.8 cr. The company is consistently profit making in the past three years and has reported a 23.05% growth in net profit in September quarter at Rs 16.87 cr and sales has risen 14.73% to Rs 79.43 cr.
It has provided impressive returns of 4.54% monthly, 18.98% quarterly and 96.49% half yearly basis. Financial ratios are also excellent with return on equity of 10.9%, net profit margin of 20.46%, but liquidity and cash flow ratios are not encouraging.
It is currently trading at a Price Earnings Multiple of 59.72 which indicates higher valuation by market.
On technical charts, Relative Strength Index (RSI) of 48.44 is neutral for the stock, while MACD has witnessed a bearish crossover and average directional index (ADX) of 28 indicates range bound trading. Stochastic momentum indicator of 23 suggests bearishness. Presently trading above 50 DMA of 121.
Target: 145 Duration: 6 weeks Strategy: Hold/Buy
Motilal Oswal Financial Services Ltd ( BSE:532892, NSE: MOTILALOFS) Category: Large Cap
Motilal Oswal is a reputed name in financial services providing private wealth management, retail broking and distribution, institutional broking, asset management services, among others.
The company reported a net profit growth of 28.32% at Rs 101.59 cr in June quarter, while sales rose 82.07% to Rs 561.35 cr. Earnings per share rose 26.82% to Rs 6.95. On a returns perspective, 6,62% monthly, 28.7% quarterly and 58.52% half-yearly is quite impressive while financial, liquidity ratios present a mixed picture.
Return on equity of 20.15%, net profit margin of 20.85% are on par with industry while liquidity ratio is below that of competitors and cash flow is a cause for concern. Promoters hold 70.74% stake. Currently trading at a PE of 271.04, the scrip is valued higher by the market.
Financial ratios present a mixed picture with a return on equity of 20.15%, net profit margin of 20.85% but liquidity and cash flow ratios aren’t encouraging. On technical charts, RSI of 48.54 is neutral, MACD line has witnessed a bearish crossover and ADX of 28.75 denotes range bound trading, stochastic indicators are bearish. Presently trading above 50 DMA of 1310.46.
Target: 1430 Duration: 6 weeks Strategy: Buy/Hold
Emkay Global Financial Services Ltd (BSE: 532737 NSE: EMKAY) Category: Small Cap
Emkay Global Financial Services was launched in 1995 and has won several awards for outstanding performance in the field of financial services. It is into portfolio management, wealth management, institutional equities, retail broking services and investment banking.
The company posted a net profit growth of 411.14% at Rs 8.17 cr while sales rose 90.34% to Rs 35.52 cr. It is trading at a PE of 75.61 which indicates higher valuation by market. On a returns perspective, 5.36% monthly, 56.63% quarterly, six monthly returns of 209.45% are quite impressive.
Financial ratios give a mixed picture with return on equity at 9.02%, net profit margin of 11.58% are comparable with peers while liquidity ratios and cash flow ratios are weak. Promoters hold 72% stake.
On technical charts, RSI of 46.34 indicates neutral to bearish while MACD line has a bearish trend, ADX of 29 indicates range bound to uptrend, stochastic indicators are bearish. Trading close to 50 DMA of 260.
Target: 289 Duration: 4 weeks Strategy: Hold
IIFL Holdings Ltd (BSE: 532636 NSE: IIFL) Category: Large Cap
IIFL Holdings was established in 1995 and has emerged as a financial services conglomerate. It set the trend of competitive brokerage rates by providing 5 paise trading platform. Now it provides non-banking finance, broking, mutual funds, investment banking, institutional equity, realty broking land and advisory services. It has 1100 branches and won several awards for performance.
Net profit rose 44.02% to Rs 198.09 cr for June quarter, sales rose 43.50% to Rs 1,473 cr, EPS has risen sharply to 6.19. On a returns perspective, six monthly returns of 24.26% is quite impressive while 2.34% quarterly,0.73% is just average.
It is trading at a PE of 121.71 which signals higher valuation by market. Financial ratios present a mixed picture with return on equity at 15.61%, net profit margin of 13.96%, while liquidity and cash flow ratios aren’t impressive. Promoters hold 29% stake.
On technical charts, RSI of 55.91 is bullish, MACD has witnessed a bearish crossover and ADX of 22 indicates range bound trading. Stochastic indicators are also bearish. Prices are trending above 50 DMA of 474.
Target: 644 Duration: 5 weeks Strategy: Hold/Buy
The uptrend in equities is reflected in the financial performance of leading equity broking firms. When markets boom, investors prefer to park their fund in equities. According to a survey of 3 lakh investors in the country conducted by Geojit Financial Services, 61% prefer to invest directly in equities as against 25% for mutual funds. This augurs well for brokerages who can look forward to better quarterly performances in this financial year.
Most brokerages are moving from pureplay broking services to portfolio management and wealth management services. Cut throat competition for brokerage rates, stiff competition provided by discount brokers are challenges established players need to tackle. The focus on mutual fund SIPs is set to provide further depth to market.