Geojit Financial Services (NSE:GEOJITFSL)
About the company
Geojit Financial Services Limited offers a complete spectrum of financial services. Key services include broking, margin funding, portfolio management and equity research advisory. The company also partners with other institutions like ICICI Lombard, Bajaj Allianz and Star Health to provide general, health and life insurance. It generates a small portion of revenues through the development and maintenance of financial software. The financial services and products component accounts for 95% of company revenues.
The company largely caters to clients that have delivery-based requirements in equity. Its products include Selfie (a trading and investment platform), Funds Genie (a mutual fund investment and analysis platform) and Smartfolio (a product similar to Smallcase).
Company Metrics
This company doesn’t need a detailed financial overview. Some key metrics should give perspective.
- Cash is 75% the share price.
- The company trades at 1.5x tangible book value.
- The company has negative net debt, a current ratio of 60 and an interest coverage of 26.
- The Graham number is 64.
- Dividend yield at current price is 6.3%.
- The company’s EV/EBIT (assuming the company gets book value of short-term investments) is 1.8. Less than 2 years’ FY22 EBIT buys you the whole company.
- Stock trades at less than 2x NCAVPS (liquidation value) of 26.
Valuation
I value the stock somewhere between 60 and 75. This estimate assume an 8-10% growth rate in 3 year average net income per year and a 30% reinvestment of net income each year. I use a 16% and 20% discount rate for the base and conservative case.
This represents a potential 40%+ upside from current levels.
What’s priced in?
Another way to look at the stock is to see what assumptions we’d have to make to arrive at current levels.
