2 wealth management stocks where Jefferies initiated coverage with 'Buy' ratings

efferies has initiated coverage on two wealth managers namely  360 ONE (erstwhile IIFL Wealth Management Ltd) and Nuvama Wealth Management Ltd with 'Buy ratings, as it believes domestic wealth managers are well-placed to ride on India's economic growth and financialisation of savings, especially into capital markets.

Leading players will benefit from strong inflows & operational efficiencies to deliver 20-22 per cent profit CAGR over FY24-27, it said while suggesting a price target of Rs 900 price target on ONE 360 per share and Rs 6,000 apiece on Nuvama. 

Jefferies said a rise in share of trail fees (70-75 per cent by FY27E) improves earning visibility and supports its view of valuation re-rating.

360 ONE share price

Jefferies said 360 ONE is the largest domestic wealth manager with UHNI focus and a leading asset manager in private markets. Over FY24-27E, it believes network expansion and growing client vintage should drive 25 per cent CAGR in active AUM of wealth business. AMC is entering a PE fundraising cycle as large maturities approach and should deliver a 20 per cent AUM CAGR.

"Despite some pressure on fees, operational leverage will drive a consolidated C/I ratio improvement of over 400 bps over next 3 years and deliver PBT CAGR of 22 per cent. We value the firm using DDM and arrive at a price target of Rs 900 (26 per cent upside, implied P/E of 28 times Jun-26E). HNI / global offerings are small and provide future optionality," Jefferies said.

Nuvama Wealth Management

In the case of Nuvama, Jefferies called it a diversified platform with a growing wealth franchise. Wealth management  contributes 60 per cent of revenues (UHNI 25 per cen & HNI 35 per cent) along with Investment banking (22 per cent), custody services (18 per cent) and a nascent AMC. The management is investing in wealth franchise build-out (RM network to double over FY23-27E) and Jefferies expects Nuvama to log 22 per cent growth in AUM and 20 per cent growth in PBT  compounded annually over FY24-27E.

"High base of IB can drag consolidated earnings (17 per cent CAGR). We use DDM and arrive at a price target of Rs 6,000 (implied P/E of 24x Jun-26E). Nuvama's valuation discount is driven by a lower mix of Wealth / ARR, and we expect the steady improvement in business mix to drive re-rating for the stock over the medium-term, however, near-term upside can be limited after the recent run-up," it said.