Stock To Buy: Top NBFC Stock Reports 38% Profit Growth, 28% AUM Growth Planned: Top Brokerage

Top brokerage firm KR Choksey has given a buy rating to the stock of Bajaj Finserv Ltd. The company reported a consolidated profit of Rs. 15,569 Mn, a growth of 38.7% YoY, and a growth of 18.9% QoQ. The consolidated revenues stood at Rs. 2,08,031 Mn, an increase of 15.5% YoY, and an increase of 30.9% QoQ. Additionally, the management is confident of delivering a 25%-28% growth in AUM driven by its omnipresence strategy and aggressive acquisition of customers.

Stock To Buy: Target Price

The Current Market Price (CMP) of Bajaj Finserv Ltd. is around Rs. 1,653. KR Choksey has estimated a Target Price for the stock at Rs. 1,943. This stock has the potential to give a 17.2% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 272,219 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 1,653
Target Price	Rs. 1,943
Potential Upside	17.20%
52-week high share price	Rs. 18,621
52-week low share price	Rs. 1,621

Strong earnings

The company's Profit after tax for Q2FY23 reported a growth of 87.8% YoY at Rs. 27,810 Mn mainly on account of robust AUM growth, higher net interest income and better asset performance. This also includes profit after tax of BHFL of Rs. 3,060 Mn, a growth of 84.0% YoY. Assets Under Management (AUM) for BAF as of September 30, 2022, increased by 30.8% YoY Rs. 21,83,660 Mn. Bajaj Allianz General Insurance (BAGIC)'s Profit after tax for Q2FY23 stood at Rs. 3,360 Mn as against Rs. 4,250 Mn in Q2FY22. Bajaj Allianz Life Insurance Co. (BALIC)'s Shareholders' profit after tax during Q2FY23 stood at Rs. 1,590 Mn as against Rs. 1,040 Mn in Q2FY22, mainly due to higher profit on sale of investments.

Stock Valuation:

Giving a buy rating, the firm said, "We anticipate that the company's opex will remain higher due to increasing spending on digital initiatives. We have factored in a revenue CAGR of 9.4% over FY22-24E and a net profit CAGR of 23.7% over the same period. We have used the SoTP approach to arrive at a target of Rs. 1,943 per share (previously Rs. 1,884 per share adjusted to the split and bonus); indicating an upside potential of 17.2% over current market price. Accordingly, we maintain our buy rating on the shares of Bajaj Finserv Ltd."

BALIC Market share improving

BALIC's new business premium for Q2FY23 stood at Rs. 22,350 Mn, which was flat on a YoY basis. Gross Written Premium (GWP) increased by 9.0% YoY to Rs. 41,550 Mn. The market share in Individual Rated New Business (IRNB) terms increased from 6.2% to 7.7% among the private players in H1FY23. In Q2FY23, IRNB grew 32.0% YoY, vs 7.0% growth for private players, 3.0% YoY growth for LIC vs overall industry growth of ~6.0%.

VNB margin expansion

The company expects to gain market share in retail and increase its Net VNB. The focus on a high-yielding product mix has led to VNB margin expansion for the quarter. The life insurance business is expected to grow further with an innovative product pipeline & a healthy presence in the credit protection segment. In addition, the company strives to improve its market share through a well-diversified product & distribution mix. The lending business continues to deliver a 30%+ growth in business momentum with improved operating metrics.

Disclaimer

The above stock was picked from the brokerage report of KR Choksey. 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.