Hargreaves Lansdown PLC

Hargreaves Lansdown PLC (LON: HL.) is an FTSE 100 index-listed United Kingdom-based company. It provides direct to investor investment service to investors from a range of investments, including funds, Equities, ETFs, investment trusts, bonds, and gilts.

The Company will pay an interim dividend of 12.26 pence per share on 01 April 2022, while the ex-dividend date was 03 March 2022.

Rationale for Valuation – BUY at GBX 1,042.31

• Assets Under Administration: At the end of H1 FY22, HL. reported a 17% year-on-year increase in Assets under administration to £141.2 billion.
• Technical Indicators: From a technical standpoint, the stock price is sustained between the lower Bollinger band and the middle Bollinger band. Hence, there could be an uptick in the stock price in the near term. Also, the 14-days RSI of ~39.32 approaches an oversold territory.
• Decent Growth in Interim Dividends: The Company’s interim dividend grew by around 3% during H1 FY22 when compared with H1 FY21.
• Strong UK GDP: According to the Office for National Statistics, the UK GDP grew by 0.8% in month-on-month terms in January 2022 after a 0.2% decline in December 2021.

Key Risks

• Interest Rate Hike: The Federal Reserve announced a first interest rate hike (by 0.25%) in over three years and indicated seven rate hikes in 2022.
• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.

H1 FY22 Financial Highlights (for the six months ended 31 December 2021, as of 22 February 2022)

(Source: Company Website)

• New Business: For H1 FY22, HL reported a net new business of £2.3 billion.
• Profitability: The Company’s diluted earnings per share remained 25.7 pence for H1 FY22.

One Year Share Price Chart

 (Source: Refinitiv, Analysis conducted by Kalkine Group)

Valuation Methodology: Price/Book Approach (FY22E) (Illustrative)

Conclusion

The Covid-19 pandemic has accelerated two market trends - change in demographics and permanent shift to digital. Therefore, the demand for online business and younger clients has spurred, creating significant opportunities for the Company. The stock made a 52-week high and low of GBX 1,778.00 and GBX 961.15, respectively.

Based on the decent financial performance during H1 FY22, 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 1,042.31 (as on 21 March 2022 at 09:51 AM GMT), with lower double-digit upside potential based on 9.93x Price/NTM Book value per share (approx.) on FY22E book value per share (approx.).

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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