Brokerage firm B&K Securities has initiated coverage on Bajaj Finserv with a 'buy' rating and a price target of ₹1,867 per share. This target represents a potential upside of 21% from the stock's most recent closing price of ₹1,542.
Bajaj Finserv, the financial services arm of Bajaj Group, serves as the holding company for various financial services businesses within the group. It operates as a diversified financial services provider, offering a range of financial products and services, including health insurance, lending, wealth management, and payment solutions.
The brokerage said Bajaj Finserv provides investors with an opportunity to play the complete gamut of the financialisation theme in India. It says, the company's subsidiaries, such as Bajaj Finance (BFL), Bajaj Allianz General Insurance Co. (BAGIC), and Bajaj Allianz Life Insurance Company (BALIC), are key players in their respective areas.
The brokerage highlights that Bajaj Finserv's new ventures, namely Bajaj Finserv Direct (BJFD) and health tech initiative Bajaj Finserv Health (BFHL), have exhibited substantial growth in recent years, both in terms of revenue and customer engagement.
However, it stated that these ventures still have significant headroom in acquiring customers from the BJFIN group customer base as well as externally. The brokerage expects the growth momentum to continue, expecting BJFD to witness a cash break-even over FY25/26, while the investment cycle in BFHL is likely to continue for a while.
Regarding BFL, BAGIC, and BALIC, the brokerage underscores their leading positions in their respective market segments, with strong growth and profitability. BALIC, in particular, has experienced a notable turnaround in the last three years and is poised for further profitability growth, it added.
BAGIC is the third-largest private general insurer and has historically demonstrated a balance of growth and profitability. BALIC is one of the fastest-growing life insurers (sixth largest among private players).
BFL remains the primary driver, constituting 70% of BJFIN’s valuation, while the brokerage foresees BAGIC and BALIC (jointly contributing 25%) as vital factors supporting BJFIN’s valuation in the future.
Bajaj Finance is a deposit-taking non-banking financial company (NBFC-D) registered with the Reserve Bank of India. BFL has a franchise of 73 million customers with assets under management (AUM) of ₹2,701 billion. Currently, Bajaj Finserv holds a 52.5% stake in Bajaj Finance.
The brokerage expects the BFL to deliver an AUM/PAT growth of 30% CAGR over FY23–25E, mainly driven by growth in its current business lines, and growth post FY25 to be incrementally driven by the new business lines.
The brokerage points out that the entry of Jio Financial Services into consumer and merchant financing segments and its consequent impact on growth and profitability in sales finance and B2C business is a key area of observation for BFL.
In terms of valuation, the brokerage valued BFL at 6x FY25E book value, BAGIC at 27x FY25E PAT, and BALIC at 2.1x FY25E embedded value. Over and above this, it believes these new ventures to have significant option value in the long term.
08 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.