Multibagger stock for 2025: Macquarie recommends THIS stock to buy for long-term

Aditya Birla Capital (AB Capital) is poised for substantial growth over the next three years, according to Macquarie, which has identified the company as one of its top picks. The brokerage believes it is on track to double in three years.

As per Macquarie, the recent underperformance in AB Capital’s stock offers a good buying opportunity, citing the company’s AAA credit rating, sustainable ROA of 2.3 percent, and attractive valuation of 0.9 times FY27E price-to-book value (P/BV).

The brokerage has an ‘outperform’ call on the stock with a target price of ₹260 for 2025-end, implying an upside potential of 40 percent from previous close.

Macquarie identified several key catalysts that could drive AB Capital’s future performance. It expects rising margins, fueled by falling interest rates, alongside growth in higher-yielding unsecured loans, to bolster the company’s earnings. Additionally, lower credit costs should further support ROA improvement.

According to Macquarie, AB Capital offers a compelling long-term growth story, particularly as it taps into India’s SME lending sector. The company’s SME book is projected to expand at a 25-30 percent CAGR over the next three years, making it a key driver of growth. Macquarie believes the new CEO’s leadership, combined with improving growth and profitability metrics, will enhance AB Capital’s medium-term outlook.

Underperformance Creates a Buying Opportunity

Macquarie noted that AB Capital’s recent underperformance was primarily driven by a sharp slowdown in AUM growth, which has fallen from over 40 percent at its peak to around 20 percent currently. The decline stemmed from reduced personal loan disbursements, largely due to the company’s heavy reliance on digital partners. One major fintech partner faced operational issues, prompting AB Capital to cut ties completely, impacting its loan growth.

Additionally, margins contracted over the past 12 months, while credit costs edged higher, mainly due to its unsecured loan portfolio. As a result, AB Capital’s ROA declined from a high of 2.4 percent in June 2023 to 2 percent at present, Macquarie said.

Fundamental Strengths Remain Intact

Despite the recent setbacks, Macquarie emphasized AB Capital’s strong fundamentals. As an AAA-rated NBFC with a cost-conscious approach, the company maintains low cost ratios, which supports sustainable ROA in the range of 2.3-2.4 percent once the unsecured NPL cycle normalizes.

The brokerage expects unsecured personal loan growth to recover, aided by the anticipated fall in interest rates, which should improve margins and drive a rebound in ROA. Despite the slowdown in personal loans, overall loan growth continues at approximately 20 percent and is likely to gain momentum, Macquarie added.

Valuation Provides Strong Support

Macquarie highlighted that AB Capital’s core NBFC business is trading at just 0.9 times FY27E P/BV, offering deep value given the company’s sustainable ROA of 2.3 percent. The brokerage pointed out that this valuation represents a 30-70 percent discount to its peer group, which operates with an average ROA of around 2.8 percent. Macquarie expects this valuation gap to narrow significantly as AB Capital demonstrates a recovery in growth and profitability.

Potential Risks

Macquarie cautioned that deterioration in asset quality within the NBFC segment could lead to higher credit costs, negatively impacting ROA. It also flagged the risk of senior management attrition, which could disrupt execution. Additionally, slower growth in the unsecured loan book may temper the company’s expansion plans.

Stock Price Trend

The stock has gained over 5 percent in the last 1 year. Meanwhile, in March 2025 so far, it has added 18 percent following a 13 percent loss in February. Furthermore, it was flat in January.

Currently trading at ₹184.55, the scrip is 25 percent away from its 52-week high of ₹246.95, hit in June 2024. Meanwhile, it recorded its 52-week low of ₹148.75 last month.

In summary, Macquarie views AB Capital as a rising star with the potential to double in value over the next three years. The brokerage sees the current underperformance as a chance for investors to accumulate the stock at an attractive valuation, given the company’s AAA rating, stable ROA, and long-term growth potential.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.