Shares of Aditya Birla Capital Ltd., the financial services arm of the Aditya Birla Group, have delivered spectacular multibagger returns to investors, more than doubling in value over the past year. Despite this meteoric rise, global financial services giant Morgan Stanley believes the stock has more steam left and could climb significantly higher in the coming months.
Morgan Stanley's Bullish Call and Price Target
In a research report dated January 7, Morgan Stanley expressed high conviction that Aditya Birla Capital shares will outperform the market index over the next 60 days. The firm has assigned an 'overweight' rating to the stock with a target price of ₹427 per share.
This target suggests a potential upside of approximately 18.4% from the stock's closing price of ₹360.70 on the BSE on January 6. Analysts at the brokerage estimate an 80% or higher probability for this positive scenario to play out, citing sustained execution by the company.
What's Driving the Optimism?
Morgan Stanley's optimism is rooted in several strong fundamental factors expected to boost the company's performance. The firm forecasts a healthy acceleration in loan growth for the NBFC (Non-Banking Financial Company) segment.
Key growth drivers identified include:
- Faster Loan Growth: NBFC loan growth is expected to accelerate to 23% year-on-year, up from 21.7% in the second quarter.
- Surge in Profit: Profit After Tax (PAT) growth is projected to jump dramatically to 27% YoY, a significant increase from the 4% growth seen in Q2.
- Stable Margins: The Net Interest Margin (NIM), a key profitability metric, is anticipated to remain stable quarter-on-quarter. Morgan Stanley notes that sustained growth in unsecured consumer loans could potentially lead to NIM expansion starting from the fourth quarter of the fiscal year 2026.
Furthermore, the Return on Assets (ROA) is expected to continue expanding, supported by a lower cost-to-assets ratio following a spike in the previous quarter. Credit costs are also likely to remain stable at levels below the company's normalised band.
Stock Performance and Trading Activity
The stock's journey has been remarkable. On Wednesday, January 7, Aditya Birla Capital's share price rose over half a percent in intraday trade, hitting a high of ₹362.80. This movement followed a record-breaking session on January 6, when the stock scaled a 52-week high of ₹369.25.
The contrast from its low point is stark. The stock had touched a 52-week low of ₹148.75 on February 17 of the previous year. According to BSE data, the NBFC stock has delivered a staggering 101% return over the last one year. Zooming out, the five-year performance is even more impressive, with the stock skyrocketing by 288%.
Potential Risks: Upside and Downside
Morgan Stanley also outlined factors that could influence the stock's trajectory beyond its base expectations. On the positive side, upside risks include better-than-expected asset quality and credit costs, a faster improvement in Return on Equity (ROE), and a reduction in market concerns surrounding unsecured loans.
Conversely, the report highlights several downside risks that investors should monitor. These include a sharp rise in bad loans, particularly in the personal unsecured segment, a slowdown in loan growth across lending businesses, and any adverse regulatory developments or poor Annual Premium Equivalent (APE) growth in the company's life insurance business.
The analysis from Morgan Stanley provides a compelling case for continued growth, suggesting that Aditya Birla Capital's strong run, backed by solid fundamentals, may not be over yet. Investors are advised to consider these insights alongside their own research and risk appetite.
