Buy This Stock For A Target Price Of Rs 9500: ICICI Securities

Bajaj Finance is a dominant player in the consumer finance space while it has also made a foray into various lending segments wherein housing has grown to a significant size. Consumer business forms ~33% of overall consolidated AUM. Bajaj Finance maintained strong operating metrics over various credit and rate cycles leading to >18% RoE and >3.5% RoA consistently.

Q4FY22 Results

The stocks has shown healthy business momentum, and improved asset quality.

• Strong NII growth at 30% YoY largely in line with estimates at Rs 6064 crore.
• C/I steady to 34.6% vs. 34.7% QoQ as costs were controlled.
• GNPA, NNPA ratio declined to 1.60%, 0.68%, respectively, in Q4FY22.
•  PAT grew 80% YoY and 14% QoQ to |Rs 420 crore

Why should you buy?

Digital transformation with robust customer additions and wallets to boost profitability factoring initial cashbacks as part of opex, no impact on profit.  Asset quality performance continues to improve.  RoE at ~18% and RoA at >3.5%. To seek clarification from RBI on credit cards business

Target Price And Valuation

The company's core business has got potential and is well on track to get transformed into an adaptable new age fin-tech. There is no plans to convert to a bank on immediate basis. Maintain TP of | 9500 by valuing at ~8.4x FY24E ABV.

The ICICI securities says, "We believe since the fin-tech story is embedded in this business, valuations should stay at premium. The digital web platform, similar to app is the new strategy in FY23. We raise PAT estimates for FY24 by 17.8%.  We maintain BUY rating on the stock."

 

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. 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 based on the article.