Buy Bajaj Finserv For A Target Of Rs. 20,000: ICICI Direct

Indian headline indices have been knocked down severely for the fifth consecutive day today with Nifty plunging to 17,149 levels. On the sharp sell-off, Amar Ambani-Senior President & Head - Institutional Equities, YES Securities is quoted as saying in a leading publication that the "equities corrected massively, possibly reacting to US equities trending lower and rise in crude oil prices. In my view, there were no positive triggers to take the market upwards in the near term and which is why volumes in large cap names are down 20-30% in 2022 so far, as compared to 2021, even when market caps are higher by 20-25% on a year-on-year basis."

Meanwhile, as quarterly earnings continue to dictate stock specific action, brokerage firm ICICI Direct has placed its 'Buy' call on the stock of Bajaj Finserv for a target price of Rs. 20000 per share for a period of 12 months. Given the stock's last traded price of Rs. 15707.15, potential investors in the stock can make 27% returns.

Stock	Current price	Target price	Potential gains
Bajaj Finserv	Rs. 15707.15	Rs. 20000	27%

Q3FY22 Results of Bajaj Finserv: Lending business resilient, insurance business low

• Consolidated revenue grew around 10.4% YoY; PAT declined 2.6% YoY
• AUM up 26% YoY to Rs. 181250 crore; PAT up 85% YoY led by low provision
• GWP declined 13% YoY to Rs. 2959 crore; PAT steady YoY at Rs. 304 crore
• Robust growth at 30% YoY in life premium; high operating spending impacted PAT

Bajaj Finserv valuations:

The scrip of Bajaj Finserv in the last 5 years has grown by around 5.2 times from around Rs. 3170 in Jan 2017 to Rs. 16333 in Jan 2022. For the financial concern, rolling valuation to FY24E and increasing discount to 15%, the brokerage value Finserv at ~39x FY24E EPS.

Key triggers for future price performance:

As per the brokerage lending activities amid accelerated growth shall trigger the company's earnings going ahead. Also the company's capabilities to swiftly switch to an offline business model from online presence shall also boost its valuations. Furthermore, the company's selective product mix shall drive premium growth & earnings in life & general insurance business

Alternate Stock pick from the finance space:

In the BFSI segment, ICICI is bullish on HDFC Ltd that is a leading housing finance company with loan size of appx. 5 lakh crore with presence in life insurance, banking, AMC via its subsidiaries The brokerage recommends to buy HDFC for a target price of Rs.3350. The stock's last traded price is Rs. 2528 per share on the NSE.

Disclaimer:

The stock is taken from the brokerage report of ICICI Direct dated January 24, 2022. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions taken based on the article.

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