Hargreaves Lansdown PLC

Hargreaves Lansdown PLC (LON: HL.) is an FTSE 100 listed company and is engaged in digital wealth management services.  

Investment Rationale for Valuation – Buy at GBX 1,030.00

• Net New Business: The Group reported the net new business of £2.32 billion for the 6 months ended 31 December 2021.
• Uptick in AUA: The company reported an increase in total assets under administration to £141.2 billion in H1FY22, reflecting an increase of over 17% to the prior corresponding period.
• Dividend: There has been an increase in interim dividend per share by over 3% to 12.26 pence during H1FY22, compared to 11.90 pence in H1FY21.
• Technical Indicator: The price of the stock seems to be hovering around the middle Bollinger band, with a 14-day RSI level of 39.26 indicating the possibility of reversal.

Key Risks

• Macro Risk: The outbreak of the war in Ukraine and continuing impacts of the pandemic continue to put pressure on the equity markets.
• Technology Risk: The company is predominantly dependent on technology for its services and any disruption in any technological aspect might impact the functioning of the group.

Financial Highlights (for the 6 months ended 31 December 2021, as of 22 February 2022)

(Source: Company Website)

• Revenue Update: The Group reported revenue of £291.1 million in H1FY22, compared to revenue of £299.5 million in H1FY21.
• Profit Before Tax: The profit before tax stood at £151.2 million in H1FY22.

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY23E)

*Peers: Peers considered are IntegraFin Holdings plc, Bridgepoint Group PLC, and London Stock Exchange Group PLC.

*All selected peers are LSE-listed Companies from the Financials sector.  

Conclusion

The Group is focused on investing in its technology and capabilities and adding on further clients to its business.

Based on the uptick in AUA, rise in dividend, investments in technology and support from the valuation as done using the above method, we have given a “Buy” recommendation on Hargreaves Lansdown PLC at the current market price of GBX 1,030.00 (as of 31 March 2022, at 09:18 AM GMT+1) with lower double-digit upside potential based on 22.56x Price/NTM Earnings (approx.) on FY23E earnings per share (approx.).

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

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