KFin Tech stock soars 5% after profit climbs 28% YoY in Q2

The company’s revenue from operations grew 16 percent YoY to Rs 209 crore in Q2FY24 from Rs 180 crore in Q2FY23

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Shares of KFin Technologies rallied 5 percent to day’s high of Rs 484 per share on October 23 after the company’s profit-after-tax (PAT) rose 28 percent year-on-year (YoY) to Rs 61.4 crore in the September-ended quarter for fiscal year 2023-24 (Q2FY24). The S&P BSE Sensex was flat at 65,415 levels, as of 9:50 am.

In the past three months, the stock of this midcap company has surged 30 percent as against 2 percent decline in the Sensex benchmark.

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The company’s revenue from operations grew 16 percent YoY to Rs 209 crore in Q2FY24 from Rs 180 crore in Q2FY23. KFin Tech added 172 new corporate clients and 4 million investor folios under issuer solutions.

That apart, the company’s earnings before interest, tax, depreciation, and amortisation (Ebitda) increased 32 percent YoY to Rs 93 crore, while Ebitda margin expanded by 540 basis points (bps) YoY to 44.8 percent in Q2FY24.

“We expect to see high revenue growth going forward. Our margin band is expected to be in the range of 42-45 percent. Since we have not paid any dividend, we will use cash to fund the company’s inorganic growth going ahead,” said Sreekanth Nadella, managing director and CEO, KFin Tech on CNBC-TV18.

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KFin Tech is a technology-driven financial services platform providing comprehensive services and solutions to the capital markets ecosystem including asset managers and corporate issuers across asset classes in India. The company offers services to asset managers such as mutual funds, alternative investment funds, wealth managers and pension.

In an earlier note, analysts at IIFL Securities initiated a ‘buy’ rating on the counter, with a target price of Rs 525 per share.

“We estimate KFin Tech’s earnings growth at 15 percent per annum over FY23-25E. However, given high PAT-to-FCF conversion, robust core returns on equity (RoE), and strong growth optionality in newer businesses, the stock warrants premium valuations. Our target multiple for KFin Tech is at 15 percent discount to CAMs (similar earnings growth with dominant position), but valuation can narrow if KFin Tech surprises on growth,” they added.

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