scorecardresearchBajaj Finance, Bajaj Finserv stock check: 5 analysts tell us what fundamental and technicals indicate for these two
Shares of Bajaj Finance and Bajaj Finserv have eroded significant wealth of investors in the last one year

Bajaj Finance, Bajaj Finserv stock check: 5 analysts tell us what fundamental and technicals indicate for these two

Updated: 06 Jan 2023, 04:28 PM IST
TL;DR.
Bajaj Finance's AUM grew 27 percent YoY and 6 percent QoQ in Q3FY23 versus 31 percent YoY and 7 percent QoQ in Q2FY23.

Shares of Bajaj Finserv declined 2.63 percent while those of Bajaj Finance declined 1.95 percent on BSE on January 6, extending their losses into the third consecutive session.

Both stocks have eroded significant wealth of investors in the last one year; shares of Bajaj Finance have lost 23 percent in the last one year while Bajaj Finserv stock has fallen 21 percent. Sensex is up about half a percent for the period. 

Shares of Bajaj Finance and Bajaj Finserv in the last one year.
Shares of Bajaj Finance and Bajaj Finserv in the last one year.

MintGenie talked to analysts to understand the fundamental and technical factors of these two stocks. Here's what they said:

Fundamental views on Bajaj Finance

Analyst: Jehan Bhadha, Senior AVP, Equity Research – Retail Dept, Nirmal Bang Securities

Bajaj Finance has transformed itself from a captive auto financier offering two-wheeler loans for Bajaj Auto to one of the most successful well diversified retail NBFCs across automobiles, consumer, SME, rural and commercial businesses. It is the market leader in consumer durable and digital financing.

The company has guided that it would target assets under management (AUM) of 3.8-4 lakh crore by FY25, translating to 26 percent CAGR over FY22-25E.

The analyst expects the company to deliver on its guidance on the back of (i) its low market share in large segments like mortgages and SMEs, (ii) deeper client mining (having 6.6 crore customer franchises which are the third largest among private financiers, after banks like ICICI and HDFC), and (iii) continued traction in customer acquisition with the digital ecosystem – app, web platform and the full-stack payment offerings – in place.

"A higher base combined with a rise in competition in consumer financing is expected to put pressure on the company’s market share and net interest margins. However, the execution track record of the company over the last decade has been robust and so, we believe the company is available at reasonable valuations at 24 times FY24E. We maintain a constructive view from a long-term perspective," said the analyst.

Analyst: Rahul Malani, Analyst Banking & NBFC, Fundamental Research, Sharekhan by BNP Paribas

Bajaj Finance reported its Q3FY23 business updates in which AUM growth reported was 27 percent year-on-year (YoY) and 6 percent quarter-on-quarter (QoQ) versus 31 percent YoY and 7 percent QoQ in Q2FY23.

AUM growth moderated but still remained healthy. However, if we look back in pre covid times, the company reported around 37 percent CAGR growth in AUM in the last decade. It was the fastest-growing lender and growth differentials versus banks and other NBFCs were also large, said the analyst.

Thus the stock got eventually re-rated from nearly two times, the one-year forward book value to nearly eight times, the one-year forward book value over the same period, the analyst pointed out.

Now after the post-pandemic times, the company has been reporting 25-30 percent growth in the AUM and the growth differentials have also narrowed due to faster loan growth acceleration taking place at banks and other NBFCs.

"We believe that valuation multiple de-rating has happened as AUM growth is tapering down for BAF and growth differentials are also narrowing with peers. Moreover, there are also concerns about strong competition emerging in future due to the existing fintech players and new players (Jio Fin) entering the customer segment which BAF is catering to," said the analyst.

"For the long-term, we continue to like the franchise built around strong competitive moats which is difficult to replicate along with strong execution capabilities, underwriting, and data analytics and we believe it is poised to deliver strong sector-leading ROA (return on assets) of 4.7 percent and ROE (return on equity) of 4.8 percent in FY24E and ROA of 22 percent and ROE of 23 percent in FY25E," said the analyst.

Analyst: Akhilesh Jat, Category Manager- Equity Research, CapitalVia Global Research

In the December quarter, the company achieved its highest-ever quarterly gain in its client franchise. At the end of 2022, deposit books were over 43,000 crore, up from 30,481 crore at the end of 2021, representing a YoY growth of 41 percent.

"Growth of the AUM has decreased to 27 percent from 31 percent in the previous year. Weaker growth in the third quarter could raise concerns over future earnings so one should avoid this stock at the current market price," said the analyst.

Technical views on Bajaj Finance

Analyst: Sneha Seth, Derivatives Research Analyst, Angel One

The stock had been taking support around the 89 exponential moving average (EMA) on the weekly chart frame, which was breached on January 5 and going ahead, the level of 6,300 should act as resistance, said the analyst.

"Considering the recent price action, undoubtedly the trend is strongly bearish but looking at the broader picture, it is not advisable to exit after a 20 percent price decline from the recent high. Traders should stay on the sidelines and it would be interesting to see how this stock behaves around its cluster of support i.e. 6,000-5,800," said the analyst.

Analyst: Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher

The stock has witnessed a gradual slide from the peak level of 7,700 in the last three months to slip below the significant 200DMA level of 6,700.

A steep fall below the major support level of 6,400 has further weakened the bias. The daily chart has indicated a big bearish candle with the next crucial support near 5,750.

"The stock has to move past 6,350-6,400 levels decisively for the bias to improve. With a bearish view, we anticipate the stock to slide further to 5,750 and a further fall can take it to 5,350-5,300 zone," said the analyst.

Bajaj Finance stock chart
Bajaj Finance stock chart

Analyst: Jigar S. Patel, Senior Manager - Equity Research, Anand Rathi Share and Stock Brokers

For the last four months, this counter has been making lower highs and lower lows which resulted in a 22 percent cut in prices. In the last trading session, we witnessed a massive beating along with massive volume which indicates that the downside is not over yet.

"Next credible support is seen around 5,600-5,700 where one can go for fresh long," said the analyst.

Daily MACD has made a negative cross below zero line which is hinting towards more weakness in the coming sessions.

"It is trading below all major exponential moving averages which is a matter of big concern. As of now, wait and watch. One can buy this stock near 5,600-5,700 levels only for an upside target of 6,300 and a stop loss should be 5,300," said the analyst.

Bajaj Finance technical chart
Bajaj Finance technical chart

Fundamental views on Bajaj Finserv

Analyst: Jehan Bhadha, Senior AVP, Equity Research – Retail Dept, Nirmal Bang Securities

Bajaj Finserv is a financial conglomerate with a holding of 52 percent in the financing business (Bajaj Finance), 74 percent in the life insurance (Bajaj Life Insurance) and 74 percent in the general insurance (Bajaj General Insurance) business.

The financing business having undergone digital transformation is expected to maintain its momentum of client additions along with AUM growth of 26 percent CAGR over FY22-FY25E.

"Bajaj Finserv derives 70 percent of its value from the financing business where it holds a 52 percent stake. Historically, the holding company discount has ranged between 0 to 54 percent. With the current discount being at the lower end of the range at 15 percent, we are not as sanguine on Bajaj Finserv and prefer Bajaj Finance with a long-term perspective," said the analyst.

Analyst: Akhilesh Jat, Category Manager - Equity Research, CapitalVia Global Research

Bajaj Finserv is a holding company whose subsidiaries are engaged in the business of financial services, insurance and wealth management.

The company’s revenue, net profit and EPS have risen over the last five years. Promoters' holdings are over 60 percent while FII is holding over 7 percent.

The company showed growth in revenue from retail financing general insurance, life insurance and investments and others.

Profit after tax has decreased by -0.01 percent due to high-interest costs and high employee costs. Return on equity has decreased from 21.95 percent to 21.86 percent. Return on capital employed has decreased from 11.86 percent to 11.43 percent.

"One should avoid buying at the current market price as the higher interest rates and high employee costs may lead to further drag-down in the stock prices towards 1,300 in the near term," said the analyst.

Technical views on Bajaj Finserv

Analyst: Sneha Seth, Derivatives Research Analyst, Angel One

Bajaj Finserv has been forming a lower top lower bottom and has breached the recent swing lows and the 200-day simple moving average on the daily chart around 1,480.

"Considering the recent price action and the volume in the previous session, the trend appears to be weak but at the same time on the weekly chart, 89 EMA is placed around 1,450, so one needs to be watchful and see how the stock behaves in next two-three sessions," said the analyst.

Analyst: Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher

The stock has slipped from the peak of 1,820 and witnessed a gradual fall. It is currently moving below the 200DMA level of 1,520 with a big bearish candle on the daily chart.

"The trend has weakened and the stock is anticipated to further slide with the next near-term target of 1,390 and 1,275 as per the Fibonacci retracement levels. For the bias to improve, would need to cross decisively the levels of 1,530-1,540," said the analyst.

Bajaj Finserv technical chart
Bajaj Finserv technical chart

Analyst: Jigar S. Patel, Senior Manager - Equity Research, Anand Rathi Share and Stock Brokers

Bajaj Finserv saw free fall after making a double top near 1,820-1,840 zone which resulted in a 20 percent cut in prices.

In the previous trading session, we witnessed a massive beating along with massive volume which indicates that the downside is not over yet.

"Next credible support is seen around 1,360-1,380 where one can go for fresh long," said the analyst.

Daily MACD has made a negative cross below zero line which is hinting towards more downside in coming sessions. It is trading below all major exponential moving averages which is a matter of big concern.

"One can buy Bajaj Finserv near 1,360-1,380 levels only for an upside target of 1,550 and a stop loss should be 1,280. But, as of now, wait and watch," said the analyst.

Bajaj Finserv tech chart
Bajaj Finserv tech chart

According to a MintGenie poll, an average of 29 analysts have a ‘buy’ call on the Bajaj Finance stock while an average of seven analysts have a 'hold' call on Bajaj Finserv stock.

Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.

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First Published: 06 Jan 2023, 01:11 PM IST