Buy Bajaj Finance Ltd For Target Rs.9500 - ICICI Direct
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Stellar show, beats estimates, improved visibility…
About the stock: 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 ~34% of overall consolidated AUM
* Bajaj Finance maintained strong operating metrics over various credit and rate cycles leading to >18% RoE and >3% RoA consistently
Q3FY22 Results: Healthy business momentum, improved asset quality.
* Strong NII growth at 39% YoY, 12.5% QoQ, above estimate at | 5998 crore
* C/I declined to 34.7% vs. 38.1% QoQ as costs were controlled
* GNPA, NNPA ratio declined to 1.73%, 0.78%, respectively in Q3FY22
* PAT grew 85.5% YoY and 43.5% QoQ to | 2125 crore
What should investors do? Bajaj Finance’s share price has been largely steady in the past few months while it has jumped 64% in the past year. We believe since the fin-tech story is embedded in this business, valuations should stay at premium.
* We maintain BUY rating on the stock
Target Price and Valuation: The core business has got potential and is well on track to get transformed into an adaptable new age fin-tech. We roll over our valuations and arrive at a TP of | 9500 by valuing the business at ~8.4xFY24E ABV.
Key triggers for future price performance:
* Growth on the cusp of acceleration once uncertainties of pandemic fade off
* Agility to switch from online to offline model and vice versa provides edge
* Strong asset quality performance despite shift to new norms is positive
* RoE is seen returning to ~15% and RoA at >3%
Alternate Stock Idea: Apart from BAF, in our BFSI coverage we also like HDFC Ltd.
* HDFC Ltd is the largest housing finance company in India with AUM of | 5.2 lakh crore. With housing demand picking up, we believe HDFC would be the largest beneficiary of the same
* We have a BUY rating with a target price of | 3350
To Read Complete Report & Disclaimer Click Here
https://secure.icicidirect.com/Content/StaticData/Disclaimer.html
Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer
