Nuvama Wealth Management: PAT up 105% & Revenue up 42% in FY24 at a PE of 29
AUM growth of 57-68% CAGR for FY24-29. Bottom-line expected to growth faster than top-line. Overall growth to be slightly better than industry growth
1. Amongst top 2 independent private wealth players
nuvama.com | NSE: NUVAMA
Nuvama Group got carved out of Edelweiss Group over a 2-year period from FY '21 to FY '23.
Business Segment
Wealth management business - Distribution of financial products, Investment advisory, Lending against securities and Securities broking for clients
Asset management business - Investment management for Alternative Investment Funds (AIFs) & Portfolio management services (PMS)
Capital markets business - Institutional broking business, Merchant banking business and Advisory
2. FY21-24: Operating PAT CAGR of 44% & Revenue CAGR of 27%
Operating PAT
Reported Financial Statements
Difference between operating PAT & PAT on account of Nuvama Group
Nuvama Group got carved out of Edelweiss Group over a 2-year period from FY '21 to FY '23. And to attain current holding business and entity structure, a number of arrangements, including through de-merger schemes, were put in place. This resulted in a number of exceptional items and non-recurring items getting reflected in the financial statements.
3. Strong 9M-24: PAT up 102% & Revenue up 39% YoY
Strong margin expansion
4. Strong Q4-24: PAT up 112% & Revenue up 51% YoY
PAT up 3% & Revenue up 10% QoQ
5. Strong FY-24: PAT up 105% & Revenue up 42% YoY
Strong margin expansion
6. Business metrics: Strong & improving return ratios
7. Strong outlook: AUM growth of 57-68% for FY24-29
i. Clients and client assets to grow at 19-26% CAGR for FY24-29
Clients and client assets to grow at 19-26% CAGR for FY24-29 which is reasonable considering the historic asset growth rate of 30% CAGR
In 5 years grow clients and client assets to 2-2.5x
ii. AUM to grow at 57-68% CAGR for FY24-29
In 5 years grow AUM to 6-8x
ii. PAT growth will be higher than the revenue growth
Operating leverage to deliver significant improvement in cost to income ratio
8. PAT growth of 105% & Revenue growth of 42% in FY24 at a PE of 29
9. So Wait and Watch
If I hold the stock then one may continue holding on to NUVAMA
Coverage of NUVAMA was initiated after Q3-24 results. The investment thesis has not changed after a strong FY24. There is confidence that NUVAMA is on track to deliver a strong FY25 in line with the momentum delivered in FY24
NUVAMA is in the middle of a strong run and has delivered sequential QoQ growth in top-line & bottom line in all the quarters of FY24
NUVAMA is planning for growth as its Relationship Manager headcount would grow by a CAGR of 19-41%
Double RM capacity in 3-5 years
Wealth and Asset Management to be key drivers and would constitute 75 - 80% of the earnings
10. Join the ride
If I am looking to enter NUVAMA then
NUVAMA has delivered PAT growth of 105% and revenue growth of 42% in FY24 at a PE of 29 which makes the valuations quite acceptable over the short term.
With an outlook for 50%+ AUM growth and a higher bottom-line growth a PE of 29 can be sustained by NUVAMA over the longer term
An outlook to grow slightly better than the industry
But we will be in line with the industry growth is what we can say or slightly better than that. And if there is a marginal or there is a significant improvement in the industry uptrend, we will follow that.
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