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Cash focused business model best suited…

About the stock: Geojit Financial Services is an investment service company in India with a presence in Middle East via subsidiaries, JVs and partnerships and has 466 offices throughout India and the Middle East.

* The company has a total client base of 11.2 lakh as on June 2021

* Cash ADTO market share for the company was at 0.92%

Q1FY22 Results: Geojit Financial Services reported a mixed performance.

* Yearly revenue grew 33% to | 115 crore, brokerage income up 27% YoY

* Expenses declined 5.1% YoY, with PAT up 57% YoY to | 35.1 crore

* Total ADTO up 56% YoY but down 12.1% QoQ at | 3376 crore.

What should investors do?

Geojit has given ~2.2x returns over the past five years.

* We upgrade the stock from HOLD to BUY

Target Price and Valuation: We value Geojit at ~16.8x FY23E EPS and arrive at a revised target price of | 110.

Key triggers for future price performance:

* Yearly rise in cash ADTO trends to aid business volumes

* Cost control on client acquisition to aid profitability

* Focus on affluent clients to help client retention and, thus, revenue

* Focus on wealth management vertical to aid sustained profitability

Alternate Stock Idea: Apart from Geojit, in our coverage we also like 5Paisa.

* It is a leading discount broker and offers a play on new age fintech financial intermediary with robust client addition

* BUY with a target price of | 600

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