Monday’s session started on a positive note despite some weakness in the global markets in Friday’s session. The benchmark index is currently trading 0.61% up at 17,647 by 10:21 AM IST with all sectoral indices trading with gains.
To start the week on a cheerful note for investors, one stock that has come on my radar and is in the sweet spot to keep on the radar for an impending rally is a famous brokerage house, Motilal Oswal Financial Services Ltd (NS:). The company has a market capitalization of INR 11,482 crores and provides services related to broking, investment banking, portfolio advisory, asset management, etc.
In FY22, the company increased its consolidated revenue by 18.8% on a YoY basis to INR 4,319.83 crores, which was the record revenue for any financial year for the company so far. Consequently, net income also rose 3.91% to INR 1,309.78 crores, again the highest ever annual income yet. In fact, the company has grown its net income at a yearly rate of 29.48% over the last 5 years, which is no less than commendable.
On the valuation front, the P/E ratio of a mere 8.77, despite record earnings in FY22 is quite lucrative. To put it in perspective, competitors such as Anand Rathi Wealth (BO:), Angel One (NS:), and ICICI Securities (NS:) are trading at a P/E ratio of 21.37, 17.7, and 11.66, respectively. The P/B ratio is 2.01 for Motilal Oswal which is almost fairly valued compared to the industry’s average of 2.22.
Image Description: Daily chart of Motilal Oswal showing an ascending triangle breakout
Image Source: Investing.com
On the technical front, the share price of Motilal Oswal seems all set to make a sharp move. The stock had been consolidating in a very narrow range since August 2022 with contracting volatility. While the highs have almost remained the same during this period, the lows have consistently been moving up, indicating investors’ willingness to buy the shares.
This price action has led to the formation of an ascending triangle chart pattern on the daily chart. Today, the stock broke above this range in the early session of trading with a decent volume jump, gaining 2.95% to INR 792.2. As the breakout above the upper resistance of INR 790 has materialized, the next stop for the stock could be INR 830 in a quick span of time. Also, the stock has fairly corrected in the recent past, therefore the risk-to-reward ratio from here is also convincing.
