Stock To Buy: BoB Capital Markets Bets On Bajaj Group Stock, Sees 16% Potential Upside

Leading brokerage firm BoB Capital Markets bets on Baja Group Firm, Bajaj Finance Ltd with a Buy rating. The brokerage has assigned a Target Price of Rs 9,105 apiece on stock. It sees a potential upside of up to 16% if the stock is purchased at the current market price.

The Board of Directors of the company in an exchange filing on October 5 informed that the company intends to raise up to Rs 8,800 crore through the QIP offering and Rs 1,200 crore through convertible warrants. According to a press statement, Bajaj Finance will receive 25% of the entire payment from the parent at the time of warrant subscription and allotment, with the remainder payable upon exercising of options against the warrants.

Robust AUM growth

According to the brokerage firm, BAF has posted 33% YoY (7% QoQ) growth in AUM to Rs 2.9tn as of Q2FY24 - a positive surprise when compared with the guided range of 29-31% and our estimate of 29% for full-year FY24. AUM increased by Rs 428bn in H1FY24 vs. Rs 208bn in H1FY23. Deposits grew 39% YoY to Rs 548bn and the consolidated net liquidity surplus was strong at Rs 114bn. The company's proposal to raise capital through a qualified institutional placement (QIP) and/or a preferential issue will be placed before the board tomorrow and will serve as an indicator of growth potential.

Maintain BUY for a Target Price of Rs 9,105/Share

The brokerage said, "We remain bullish on BAF and believe its robust AUM growth, diverse business model, efficient execution and seasoned leadership team will enable it to withstand growing competition and to manage asset quality risks in new ventures such as microfinance."

It added, "We continue to value the standalone business at 6.6x FY25E ABV (Rs 8,619/sh), a 20% premium to the long-term average, and add Rs 482/sh for housing arm BHFL (2x FY25E BV) and Rs 4/sh for securities subsidiary BFSL (15x FY25E EPS) to arrive at our SOTP-based TP of Rs 9,105. BUY."

Stock Overview

The stock on Thursday closed at Rs 7,849.25 apiece on the BSE with the day's highs and lows of Rs 7,913.70 and Rs 7,828.05, respectively. In the past 1 week, it has surged 1.45%, while, in the past 6 months, it has surged 36.145. It has given 4.81% positive return in 1 year. In 3 and 5 years, it has given 132.24% and 285.13%, respectively.

Its 52-week high price on BSE is Rs 8,040.55 apiece and its 52-week low price is Rs 5,487.25 apiece. The stock has a market cap of Rs 4,75,601 Crore.

Disclaimer

The stock has been picked from the brokerage report of BoB Capital Markets. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.