Motilal Oswal has given Buy recommendation for Bajaj Finance recommended buy rating on the stock with a target price of Rs 7700 in its research r with a target price of Rs. 7700 in its research report issued on Aug 25, 2021
Motilal Oswal’s research report on Bajaj Finance
Bajaj Finserv has got an in-principle approval from SEBI for sponsoring a Mutual Fund (MF). While the opportunity is huge, given the under penetration and financialization of savings in the country, the competitive intensity in the industry is high with 44 players. Bajaj Finserv has inherent advantages in its business model, given its presence in the Retail Finance, Life Insurance, General Insurance, and Securities businesses. Strong brand presence and wide distribution reach are key pillars for garnering AUM, where BAGIC, BALIC, and BAF have proved their expertise. Cross-sell to the existing customers of these businesses is a huge opportunity. Technology investments will be a key differentiator, given the emergence of new-age Fintech players. Akin to the strong growth displayed in other lines of businesses, Bajaj Finserv will be able to deliver an industry-leading growth in the AMC business as well. Barring any new COVID-related disruptions, we expect BAF to deliver ~21% AUM growth in FY22E and 25% CAGR thereafter. This Financial Services group already had Lending products, General and Health Insurance, Life Insurance, and Broking services. With an AMC in the fold, the missing piece of a captive MF investment product (other than deposits/traditional savings/ULIP products) will also be complete. This should aid the fee and commission (particularly distribution) income of BAF, which was already exhibiting high growth until Mar’20 when COVID-19 struck.
We expect BAF to deliver ~4.8% RoA/23% RoE over the medium term. Given the positive outlook, we maintain our BUY rating, with a TP of INR7,700 per share (8x 1HFY24E BVPS).