Bajaj Finserv reported a steady performance wherein the insurance business witnessed a pick-up in business activities led by pandemic. However, a cautious approach and concerns on asset quality impacted business momentum and earnings growth. Improved awareness, digitisation and product innovation is expected to keep insurance business momentum healthy. Further, finance business has emerged stronger with a leaner operating model and robust growth guidance of ~25% for FY22E. RBI's new banking license review allowing NBFCs with asset size of >Rs. 50,000 crore and 10 years of existence to apply for banking license and the management's commentary indicating interest in applying for the same bode well from a long term perspective.
Valuation & Outlook
Pandemic led to incremental focus on product mix and business growth in insurance business that were earlier seeing healthy growth. However, concerns on asset quality and business momentum in lending business impacted earnings and perception in recent past. Bajaj Finance has sailed through the headwinds and emerged stronger with a leaner operating model. Growth guidance of ~25% for FY22E and opportunity to apply for banking licence have resulted in renewed interest of investors in the stock. This has led to expansion of valuation multiples. Factoring in long term business potential and returning of premium multiple for lending business (contributing 85% to SoTP target), we roll over to FY23E and raise our target to Rs. 10500 per share (earlier Rs. 7000) based on SOTP valuation, implying a multiple of ~26x on FY23E consolidated earnings. Hence, we maintain BUY.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_BajajFinserv_CoUpdate_Dec20.pdf
Shares of BAJAJ FINSERV LTD. was last trading in BSE at Rs.9045 as compared to the previous close of Rs. 9112.6. The total number of shares traded during the day was 28849 in over 6037 trades.
The stock hit an intraday high of Rs. 9239.6 and intraday low of 8975. The net turnover during the day was Rs. 262851355. |
