Bajaj Finance has sailed through the headwinds and emerged stronger with a leaner operating model and robust growth guidance. RBI's new banking licence review has recommended that large NBFCs with >Rs. 50000 crore assets with 10 year existence can apply for banking licence. Also, the management commentary to consider the same if it is favourable bodes well for the long term view of the stock. Growth guidance of ~25% for FY22E and opportunity to apply for banking licence have resulted in renewed interest of investors in the stock.
Valuation & Outlook
We had upgraded the stock to BUY post quarterly earnings but the multiple expansion has been far higher. We believe premium multiples are returning for Bajaj Finance. Therefore, we roll over to FY23E and raise our P/ABV multiple to 7x FY23E ABV. Accordingly, we revise our target price to Rs. 5900 (earlier Rs. 3850). We maintain BUY recommendation on the stock.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_BajajFinance_CoUpdate_Dec20.pdf
Shares of Bajaj Finance Limited was last trading in BSE at Rs.4903.3 as compared to the previous close of Rs. 4827.85. The total number of shares traded during the day was 273130 in over 26440 trades.
The stock hit an intraday high of Rs. 4957.5 and intraday low of 4783.25. The net turnover during the day was Rs. 1332141870.