Non-Lending Q3 Results Preview - Capital Markets-Linked Companies To Deliver Strong Performance: Motilal Oswal

Motilal Oswal Report

In Q3 FY24, Nifty surpassed 21,750, translating into healthy trends in key parameters (volumes, orders, client additions, etc.) for capital markets-related companies. Both equity and commodity segments continued to witness better-than-expected trends in option volumes. Angel One Ltd. and BSE Ltd. would be the biggest beneficiaries of these trends.

In the AMC sector, net equity inflows were buoyant in Oct-23 and Nov-23. The growth in equity AUM was primarily backed by strong SIP flows (SIP flows reaching an all-time high in Nov-23) and mark-to-market gains (11% Nifty gain).

Overall MF AUM, however, saw flattish trends, owing to weak trends in fixed income AUM. Increase in equity AUM would lead to improved performance for both Computer Age Management Services Ltd. and 360 One Wam Ltd.

Private life Insurance players saw a 19% growth in annual premium equivalent in Oct-23, followed by a 3% decline in Nov-23 (on a base of 20% growth in Nov-22). We expect sequential recovery in non-par share, leading to higher VNB margins.

Ex-crop, the general insurance sector experienced steady gross written premium growth of 10% and 12% in Oct-23 and Nov-23, respectively.

Growth in the health segment moderated to 10%/13% YoY over Oct/Nov-23 as compared to 27% in Q2 FY24. The motor segment too saw a lower growth of 10%/12% YoY in Oct/Nov-23 compared to 14% in Q2 FY24.

Health segment loss ratios are expected to decline on the back of price hikes. We expect Star Health and Allied Insurance Company Ltd. and ICICI Lombard General Insurance Company Ltd. to report improvement in profitability.

We remain positive on the long-term growth potential of the non-lending financials, given their broader themes of financialisation and digitisation of savings. Our top picks in this space are Angel One, SBI Life, and Star Health.

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