KFin Technologies: Revenues to grow at CAGR of 11%, expanding its footprint in the global financial services Industry
capital market ecosystems while adopting platform-driven product design and delivery approach to service the clients’ needs. They particularly note the growth potential in the emerging international segment, bolstered by the strategic acquisition of Hexagram’s fund accounting platform, while Indian MF RTA and issuer solutions provide a direct play on the surging Indian domestic capital markets and prospective AUM growth. Based on a projected FY25E EPS of Rs15, the recommendation is to initiate a BUY on the stock with a target price of ₹450.
The expected operating revenues for KFin are predicted to have a compound annual growth rate (CAGR) of 11% between FY23-25. This growth will be driven by various factors, including a 9% CAGR in the domestic MF solutions business, a 12% CAGR in the issuer solutions business due to positive capital market activity, a strong 25% CAGR in other investors' solutions business, and a 10% CAGR in other operating revenues. Operating expenses are projected to have an 8% CAGR, leading to an improvement in EBITDA margin from 41% in FY23 to 44% in FY25E.
Overall, the profit after tax (PAT) is expected to grow at a CAGR of 14% to reach Rs2.5bn between FY23 and FY25E. The assigned multiple of 30x is based on the sustainable earnings growth outlook and an average return on equity (ROE) of 24% for the period FY23-25. KFin is a capital market player that stands out for its diversified business compared to others in the market.
The key segments of KFin's business include investor solutions, issuer solutions, and global business services. The investor solutions segment serves various clients, such as domestic mutual funds, international investors, alternatives and wealth managers, and pension funds. In
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