Macquarie recommends Aditya Birla Capital for long-term growth

Macquarie has named Aditya Birla Capital (AB Capital) as one of its top stock picks for 2025. The firm believes the company's value could double in the next three years. They see the recent underperformance of AB Capital's stock as a good buying opportunity. The brokerage highlights AB Capital’s strong credit rating and growth potential in small and medium-sized enterprise (SME) lending. They rate the stock as 'outperform' with a target price of ₹ 260 by the end of 2025, which suggests a 40 percent increase from its previous closing price. Several factors could drive AB Capital’s performance, according to Macquarie. They expect margins to rise due to falling interest rates. Growth in higher-yielding unsecured loans is also anticipated. Lower credit costs may help improve the company's return on assets (ROA). Macquarie notes that the company's SME loan book is expected to grow at a rate of 25-30 percent over the next three years. The new CEO’s leadership is expected to enhance the company's growth and profitability. Despite recent challenges, such as slowing growth and contracting margins, Macquarie emphasizes that AB Capital has strong fundamentals. The company is operating with a sustainable ROA and maintaining low cost ratios, which should support future performance. Currently, AB Capital’s stock is trading at a low price-to-book value of 0.9 times, indicating potential value compared to its peers. Macquarie predicts that as the company improves its growth and profitability, this valuation gap will decrease. However, there are risks. Deteriorating asset quality and higher credit costs could hurt performance. Potential management changes and slower growth in unsecured loans may also pose challenges. In the past year, AB Capital's stock has risen over 5 percent. In March 2025, it increased 18 percent after a 13 percent decline in February. Currently priced at ₹ 184.55, it is still 25 percent below its 52-week high of ₹ 246.95. Overall, Macquarie sees AB Capital as a promising investment opportunity, cautioning investors to consider expert advice before making any decisions.