Jio Financial Services shares down 18% from record high levels; should you accumulate?

Jio Financial Services Ltd shares were trading 1.06% lower at Rs 325.45 on Thursday, marking a 17.55% decline from its peak of Rs 394.70 on April 23, 2024. At this price, the company’s market capitalization stands at Rs 2,06,762.99 crore, with a turnover of Rs 29.37 crore.

Recently, Jio Financial made significant strides in its business expansion. Its subsidiary, Jio Payment Solutions Ltd, received approval from the Reserve Bank of India to operate as an online payment aggregator. Additionally, the company entered into a joint venture with BlackRock to tap into India’s asset management industry, further strengthening its position in the financial services sector.

For Q2 FY25, Jio Financial reported a 3.13% YoY increase in net profit, reaching Rs 689 crore, compared to Rs 668 crore in the same period the previous year. Revenue from operations also rose by 14.06% YoY, to Rs 693.50 crore, from Rs 608.04 crore in Q2 FY24.

Despite this positive growth, the stock has been in a corrective phase for the past seven months. Analysts suggest that this could present an opportunity for investors. Technical analysts recommend accumulating Jio Financial shares at the current price level, with a support range around Rs 317 and Rs 300. The near-term upside target is Rs 355, and a stop-loss is recommended at Rs 300.

Investment analysts from Religare Broking also see an opportunity for accumulation, with a target price of Rs 342, and a stop-loss at Rs 317.

As of September 2024, promoters hold a 47.12% stake in the company. The stock has a high price-to-equity (P/E) ratio of 398.21, a price-to-book (P/B) ratio of 8.42, and an earnings per share (EPS) of 0.83, with a return on equity (RoE) of 2.12.

In conclusion, Jio Financial Services appears to be a good accumulation opportunity for long-term investors, particularly for those comfortable with the stock’s volatility. However, given the corrective phase and the stock’s high P/E ratio, cautious investors should keep a close watch on the support levels and set stop-loss orders to mitigate potential downside risks.