PL Recommends A Bluechip Stock That Has Potential To Give Upto 36% Returns

Prabhudas Liladhar, a leading stock broking firm has recommended a 'buy' view on Bajaj Finance Ltd, showing an upside potential of 36% in its coverage report.

According to the analyst report, "The impact of rate hikes on cost of funds is more gradual than anticipated. However our multiple stands reduced, as competition intensity remains high especially in consumer finance and mortgage segment along with company's plan to enter into risky microfinance business. However re-rating can happen if company executes long range strategy framework and increase stickiness of new franchise customers."

Quick update of Q3 result

As per the report, "Bajaj Finance's Q3FY23 earnings (PAT at Rs 29.7 billion) stood in line with our estimates (PLe: Rs 30.0 billion), on account of strong NII growth. Margins sustained, as rate hikes did not have an adverse impact on cost of funds and NIM for Q3FY23 came in at 13.24% vs 13.26% in Q2FY23. Overall stage 2 assets stood at Rs 3.94 billion as of 31 December 2022 as against Rs 4.38 billion of 30 September 2022."

The report also stated that the company witnessed a healthy core performance and growth in asset under management (AUM) due to addition of customers. "In Q3FY23, Bajaj Finance reported its highest ever customer franchise addition in a quarter- even bettering record set in Q1FY23. The company added 3.14mn customers, customer franchise grew 4.9%QoQ to 66.05 million and AUMs grew at 5.7%QoQ/27.4%YoY at Rs2,308 billion. On QoQ basis, AUM growth was driven by Consumer B2C business (6.6%+) and Rural B2C (4.1%+)."

Future strategy

The coverage of report of Prabudhas Liladhar disclosed Bajaj Finance's future strategy, which the company shares on an annual basis. "Bajaj Finance has released Long range strategy (LRS) which is an annual 5 year rolling strategy planning process with an execution plan of 12-24 months. As part of LRS, the Company analyses macro, industry outlook, technology megatrends, business megatrends and selects a leading benchmark company to learn from. As part of strategy, Bajaj Finance is planning to launch new auto loans in Q2 FY24, Micro Finance in Q4 FY24 and tractor financing in Q1 FY25. They plan to open 100 locations in UP, Bihar and North-East and another 100 locations in FY25."

Bajaj Finance Stock 'Buy' view with a target price of Rs 7,835

The analyst has asked investors to buy the Bajaj Finance Ltd with a target price of Rs 7,835 per share. The current market price of per share is Rs 5,989.95, an intraday growth of 4.06%. Buying now at the current market price will fetch you potential gains of 30.8% returns.

This bluechip's 52-week high is quoted at Rs 7,777 per share and 52-week low at Rs 5,235.60 per share respectively. The share price declined by 16.1%, and 17.5% in over 3-months and 6-months respectively.

According to Prabhudas Liladhar report, " We maintain 'BUY' rating and reduce our target price to Rs 7,835 on (7x Sep'24E PABV) from Rs 8,953 (earlier:8.4x Sep'24E PABV) as we increase our FY23/24/25 Net Interest Income estimates by 3.9%/1.9%/2.4%, given decrease in cost of funds from 7.5%/7.6%/7.7% to 7.2%/7.3%/7.4%."

Disclaimer

The stocks have been picked from the brokerage report of Prabhudas Liladhar, 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.