Shares of Motilal Oswal Financial Services surged over 5% in Friday's trade, rising to Rs 873 on the NSE after global brokerage UBS initiated coverage on the stock with a 'Buy' rating. The brokerage assigned a sum-of-the-parts (SOTP)-based target price of Rs 1,150, implying an upside potential of nearly 32% from the current market price.
According to UBS, Motilal Oswal is well-positioned to benefit from India's ongoing financialisation trend, thanks to its diversified presence across wealth management, asset management, and capital markets. The brokerage highlighted the company's increasing exposure to fast-growing assets-under-management (AUM) pools, particularly in wealth and asset management businesses.
UBS expects the Indian mutual fund industry to deliver an 18% CAGR in AUM by FY30, while high-net-worth individual (HNI) wealth and alternative assets could grow at more than 20% CAGR, creating a strong growth runway for the company.
Shift to AUM-Led model seen as key growth driver
The brokerage noted that Motilal Oswal is transitioning from a transaction-driven business model to an AUM-led, annuity-style platform, where earnings are increasingly linked to client assets rather than market trading volumes.
UBS expects Motilal Oswal to deliver strong growth over the next few years, forecasting its assets under management (AUM) to expand at a compound annual growth rate (CAGR) of 21% between FY26 and FY29. The brokerage also projects revenue to grow at a 19% CAGR during the period, while earnings are expected to outpace revenue growth with a 22% CAGR, supported by the company's increasing focus on recurring, asset-based income streams.
The brokerage believes the market is yet to fully appreciate this transformation toward higher-quality, recurring fee income streams, which could reduce earnings volatility associated with the broking business.
Attractive Valuation Despite Strong Growth Outlook
UBS values Motilal Oswal using an SOTP methodology and assigns a valuation equivalent to 19x FY27 estimated earnings. The brokerage argues that historical valuation multiples may no longer be the best benchmark given the company's evolving business mix and rising contribution from fee-based income.
The valuation incorporates premium multiples for asset-light businesses such as asset management and wealth management, while assigning relatively conservative multiples to the capital markets segment.
With robust industry tailwinds, accelerating AUM growth, and a business model shift toward recurring revenues, UBS sees Motilal Oswal emerging as a key beneficiary of India's long-term wealth creation and financialisation story.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
