Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Creating Wealth through Alpha and Compounding

Yellowstone Equity

Providing unbiased and independent research on Indian equities to global institutions and individual investors


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Regulatory Disclosure: 
Note that Ankit Agrawal (Proprietor of Yellowstone Equity) is a SEBI registered Research Analyst (Registration No.: INH000007216). Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

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Address: A-412, Shilp Aaron, Sindhu Bhavan Road, Ahmedabad, Gujarat - 380059
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Compliance/Grievance Officer:
Name: Ankit Agrawal
Email: services@yellowstoneequity.com
Mobile: +91-7575817289
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Equity Bottom-Up

Edelweiss Financial Services / Equity Bottom-Up

<ul>
<li>After a tough 3Y since the IL&amp;FS crisis, Edelweiss' credit business is now getting back on track. Asset quality has normalized to &lt;2% Net NPA.</li>
<li>Edelweiss' other businesses continue to post robust growth. ARC, Asset Management and Insurance businesses are scaling up well. Wealth Management business is on track for listing by Feb 2023.</li>
<li>At a market cap of INR 5200cr, Edelweiss is trading cheap even if one ascribes zero valuation to its Credit business.</li>
</ul>


After a tough 3Y since the IL&amp;FS crisis, Edelweiss' credit business is now getting back on track. Asset quality has normalized to &lt;2% Net NPA.
Edelweiss' other businesses continue to post robust growth. ARC, Asset Management and Insurance businesses are scaling up well. Wealth Management business is on track for listing by Feb 2023.
At a market cap of INR 5200cr, Edelweiss is trading cheap even if one ascribes zero valuation to its Credit business.


<ul>
<li>Excluding one-off gains, Edelweiss reported weak Q3FY22 earnings, led by the credit business that has been adversely impacted by operational de-leverage from declining AUM.</li>
<li>However, barring the credit business, Edelweiss’ rest of the businesses continue to post strong growth and profitability. </li>
<li>There are material headwinds in the credit business currently; however, these are poised to recede as the business scales up over the next 2Y.</li>
</ul>


Excluding one-off gains, Edelweiss reported weak Q3FY22 earnings, led by the credit business that has been adversely impacted by operational de-leverage from declining AUM.
However, barring the credit business, Edelweiss’ rest of the businesses continue to post strong growth and profitability. 
There are material headwinds in the credit business currently; however, these are poised to recede as the business scales up over the next 2Y.


Edelweiss: Cheap Valuation; Scaling Up The Credit Business Is Key

<ul>
<li>After being focused on preserving liquidity and maintaining a strong balance sheet, Edelweiss is now gearing up for growth as the environment becomes conducive.</li>
<li>In line our our thesis, asset quality deterioration has stabilized and accordingly incremental provisioning continues to be minimal. </li>
<li>We think all stars are aligned for Edelweiss to grow from here and witness valuation re-rating. Management has also guided for substantial profit catalysts over the next 3 years.</li>
</ul>


After being focused on preserving liquidity and maintaining a strong balance sheet, Edelweiss is now gearing up for growth as the environment becomes conducive.
In line our our thesis, asset quality deterioration has stabilized and accordingly incremental provisioning continues to be minimal. 
We think all stars are aligned for Edelweiss to grow from here and witness valuation re-rating. Management has also guided for substantial profit catalysts over the next 3 years.


Edelweiss: Focus On Growth Is Back, The Stock Is Ripe For Re-Rating

<p>Edelweiss reported its Q1FY22 earnings. Key highlight of the earnings was minimal provisioning, in line with our expectation as highlighted in our prior insight - <a href="https://www.smartkarma.com/insights/edelweiss-the-worst-is-behind-us" target="_blank" data-smartkarma-citation="insights:53296" rel="noopener">Edelweiss: The Worst Is Behind Us</a>. Edelweiss also reported strong growth in its capital market linked businesses and insurance businesses.</p>

Edelweiss reported its Q1FY22 earnings. Key highlight of the earnings was minimal provisioning, in line with our expectation as highlighted in our prior insight - Edelweiss: The Worst Is Behind Us. Edelweiss also reported strong growth in its capital market linked businesses and insurance businesses.

Edelweiss: Minimal Provisioning in Q1FY22 in Line with Our Expectation

<p>While Edelweiss has faced significant provisioning led losses over the past one and half years, we believe the worst is behind us now. Edelweiss had significantly cleaned up its book in Q4FY20 and in the most recent reported quarter i.e. Q4FY21, it further took significant provisioning to account for adverse impact of COVID second wave and any additional stress. Going forward, we expect Edelweiss' asset quality to improve largely assisted by significant clean-up in the past few quarters. Additionally, the residential real estate market seems to have bottomed out with liquidity coming back to the market and demand turning favorable post COVID. In line with our original thesis, Edelweiss has also significantly accelerated its shift towards fee based business model over the past couple of years. All in all, we expect significant re-rating in the stock over the next 1 to 2 years.</p>

While Edelweiss has faced significant provisioning led losses over the past one and half years, we believe the worst is behind us now. Edelweiss had significantly cleaned up its book in Q4FY20 and in the most recent reported quarter i.e. Q4FY21, it further took significant provisioning to account for adverse impact of COVID second wave and any additional stress. Going forward, we expect Edelweiss' asset quality to improve largely assisted by significant clean-up in the past few quarters. Additionally, the residential real estate market seems to have bottomed out with liquidity coming back to the market and demand turning favorable post COVID. In line with our original thesis, Edelweiss has also significantly accelerated its shift towards fee based business model over the past couple of years. All in all, we expect significant re-rating in the stock over the next 1 to 2 years.

India

Edelweiss Financial Services is a diversified Indian financial services conglomerate offering a broad range of products and services, including credit (retail and corporate), asset management (mutual funds and alternative assets), asset reconstruction, and insurance (life and general). The company caters to corporations, institutions, and individuals, providing solutions such as investment banking, wealth management, and advisory services. Headquartered in Mumbai, India, it was founded in 1995.

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Edelweiss Financial Services (EDEL IN)

Edelweiss: On Track for Strong FY23

Edelweiss' credit business is normalizing after a 3Y hiatus. Rest of the businesses are also scaling up well. As the WM business is de-merged and...

Ankit Agrawal, CFA

Edelweiss: Cheap Valuation; Scaling Up The Credit Business Is Key

Edelweiss has potential to command a valuation of INR 25,000cr+ over next 3-5Y vs current valuation of around INR 6,000cr.

Ankit Agrawal, CFA

Edelweiss: Focus On Growth Is Back, The Stock Is Ripe For Re-Rating

We think all stars are aligned for Edelweiss to grow from here and witness valuation re-rating. Management has also guided for substantial profit...

Ankit Agrawal, CFA

Edelweiss: Minimal Provisioning in Q1FY22 in Line with Our Expectation

In line with our expectation, Edelweiss reported minimal provisions in Q1FY22. The worst for Edelweiss seems to be behind it. With a strong balance...

Ankit Agrawal, CFA

Edelweiss: The Worst Is Behind Us

We anticipate Edelweiss to report strong Q1FY22 earnings as most of the cleanup in the credit book is behind us. Edelweiss is well capitalized to...

Ankit Agrawal, CFA

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