How to Find GROWTH STOCKS at lOW Valuation

Let’s discuss a method to shortlist growth stocks at low valuations.

Key Steps in the Screening Process:

1. Sales and Profit Growth Criteria:

   • Select stocks with sales growth in the last year higher than the average sales growth over the last three years.

   • Select stocks with profit growth in the last year higher than the average profit growth over the last three years.

2. Valuation Criteria:

   • Choose stocks with a Price-to-Earnings (P/E) ratio lower than the industry average.

   • Choose stocks with a Price-to-Book (P/B) ratio lower than the industry average.

3. Market Capitalization:

   • Focus on stocks with a market capitalization greater than ₹10,000 crores.

Example Analysis:

1. Manappuram Finance:

   • Valuation Comparison:

     • P/E Ratio: 8.60 (Manappuram) vs. 23.36 (Industry Average).

   • Growth Metrics:

     • AUM Growth: 18.7% (Manappuram) vs. 25% (Industry Leader Muthoot Finance).

     • Profit Growth: 46.5% (Manappuram) vs. 22% (Muthoot Finance).

   • Profitability:

     • ROA: 5.1% (Manappuram) vs. 1.42% (Muthoot Finance).

   • Diversification:

     • Gold Loans: 56%.

     • Micro Finance: 26%.

     • Vehicle Financing: 10%.

   • NPA:

     • Gross NPA: 1.9%.

     • Net NPA: 1.7%.

NOTE: Do not take this analysis as a stock recommendation before you buy a stock please do your own analysis

BONUS: let’s STUDY the annual report of IIFL Finance Ltd

Based on the press release document provided for IIFL Finance Limited, here is a detailed analysis of the company's Q1FY24 performance:

Financial Performance:

• Profit After Tax (PAT): Rs. 473 Crore, up 43% year-over-year (y-o-y).

• Profit Before Tax (PBT): Rs. 618 Crore, up 43% y-o-y.

• Total Income: Rs. 1,420 Crore, up 21% y-o-y.

• Pre-Provision Operating Profit: Rs. 787 Crore, up 20% y-o-y.

• Return on Assets (ROA): 3.6%.

• Return on Equity (ROE): 19.1%.

Loan Growth:

• Total Loan Assets Under Management (AUM): Rs. 68,178 Crore, up 29% y-o-y.

• On-Book Assets: Rs. 41,515 Crore, up 21% y-o-y.

• Off-Book Assets: Rs. 26,663 Crore, up 45% y-o-y.

Segment Performance:

• Gold Loans: Rs. 22,142 Crore, up 29% y-o-y.

• Home Loans: Rs. 22,838 Crore, up 23% y-o-y.

• Microfinance Loans: Rs. 10,255 Crore, up 63% y-o-y.

• Loan Against Property (LAP): Rs. 6,836 Crore, up 19% y-o-y.

• Digital Loans: Rs. 2,899 Crore, up 54% y-o-y.

• Construction and Real Estate Loans: Rs. 2,732 Crore.

Asset Quality:

• Gross NPA: 1.8%, down from 2.6% y-o-y.

• Net NPA: 1.1%, down from 1.5% y-o-y.

Capital Adequacy:

• Total CRAR: 20.6%, above the regulatory requirement of 15%.

Liquidity:

• Cash and Cash Equivalents: Rs. 6,510 Crore as of June 30, 2023.

• Fundraising: Raised $175 million through ECB and Rs. 452 Crore through NCDs.

Return Metrics:

• Earnings Per Share (EPS): Rs. 11.2, up 29% y-o-y.

• Book Value Per Share (BVPS): Rs. 240, up 38% y-o-y.

Growth and Strategy:

• Focus on productivity improvement and enhancing digital capabilities.

• Introduction of innovative reward and retention schemes to mitigate high employee churn.

CHART ANALYSIS OF IIFL FINANCE LTD

• Profit After Tax (PAT) Growth:

  • Significant growth in PAT from Rs. 331 crore in Q1FY23 to Rs. 473 crore in Q1FY24.

• Loan Assets Under Management (AUM) Composition:

  • All segments show growth in AUM from Q1FY23 to Q1FY24.

  • Gold Loans, Home Loans, Microfinance Loans, LAP, and Digital Loans all increased.

• Gross and Net NPA Trends:

  • Both Gross NPA and Net NPA have improved, decreasing from 2.6% to 1.8% and from 1.5% to 1.1% respectively from Q1FY23 to Q1FY24.

• Segment-wise Loan Growth:

  • Microfinance Loans and Digital Loans show the highest growth.

  • All segments indicate positive growth rates.