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Bajaj Finserv Ltd>
  • CMP : 15,065.0 Chg : -20.85 (-0.14%)
  • Target : 17,600.0 (17.03%)
  • Target Period : 12-18 Month

31 Aug 2022

Healthy quarter; growth outlook stays optimistic…

About The Stock

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

  • Consistent, faster business growth and profitability remains in focus

Pick-up in lending AUM & premium accretion aided top line

  • Consolidated revenue grew ~14% YoY; PAT up 57% YoY
  • AUM up 28% YoY to ₹ 204018 crore; PAT jump led by lower provision
  • GWP declined 25% YoY to ₹ 3119 crore; PAT up at ₹ 411 crore
  • Robust growth at 74% YoY in life premium; PAT up 48% YoY to ₹ 124 crore
What should Investors do?

Bajaj Finserv’s share price has grown by over~3x in the past five years (from ~₹ 5308 in August 2017 to ₹ 15007 in July 2022).

  • We maintain our BUY rating on the stock
Target Price Valuation

Pick-up in lending AUM, and anticipated healthy growth in insurance segment coupled with focus on digitization remains positive. We value Finserv at ~31x FY24E EPS and lower our target price from ₹ 18900 earlier to ₹ 17600/share.

Key Triggers for future price performance
  • Digital transformation, client additions and ambitious targets on AUM growth (25-27% CAGR to ₹3.8 – 4 lakh crore by FY25) to boost profitability
  • Product launch and selective product mix to aid premium growth; focuss on claims and opex to aid earnings in life and general insurance business
  • Healthy traction in all businesses to drive consolidated revenue & earnings
Alternate Stock Ideas

Besides Finserv, in BFSI our coverage we also like HDFC Ltd.

  • HDFC Ltd is a leading housing finance company with loan size of ~₹ 5.7 lakh crore with a presence in life insurance, banking, AMC via its subsidiaries
  • BUY with a target price of ₹ 2800

Key Financial Summary

Particulars FY19 FY20 FY21 FY22 5 Year CAGR(FY17-FY22) FY23E FY24E 2 Year CAGR (FY22-FY24E)
Net Sales 29,028.1 32,837.5 33,498.1 38,654.5 4.1 43,928.9 48,200.8 11.7
EBITDA 6,269.8 6,989.8 8,491.4 10,397.7 0.6 11,921.9 13,617.2 14.4
EBITDA Margins (%) 21.6 21.3 25.3 26.9 - 27.1 28.3 -
Adj. Profit 3,803.3 4,025.6 7,210.0 7,667.1 1.9 8,353.9 9,631.6 12.1
Adj. EPS (|) 15.9 16.8 30.0 32.0 - 34.8 40.1 -
PE (x) 80.6 55.4 71.9 63.8 - 27.1 23.5 -
EV to EBITDA (x) 33.2 29.4 23.9 19.0 - 17.6 14.9 -
RoE (%) 9.2 8.9 15.5 16.0 - 15.2 15.2 -
RoCE (%) 10.3 10.0 14.2 18.2 - 18.0 18.7 -
Debt / Equity 0.3 0.2 0.1 0.0 - 0.0 0.0 -
Source: Company, ICICI Direct Research

Key Financial Summary

 | crore   FY19   FY20   FY21   FY22   3 Year CAGR
 FY23E   FY24E   2 year CAGR
Revenue          42,608.2          54,351.5          60,591.6          68,439.0 17%          82,436.5            1,03,741.4 23%
PAT 3133.5 2269.0 4470.5 4556.8 13% 6858.4 8992.2 40%
EPS (|) 198.0 269.7 176.2 263.5   431.0 565.1  
BV (|) 1498.4 2026.3 2199.7 2529.3   2958.6 3522.0  
P/E 75.9 55.8 85.4 57.1   34.9 26.6  
P/BV 10.0 7.4 6.8 5.9   5.1 4.3  
RoA 1.8 1.9 1.1 1.4   1.6 1.5  
RoE 14.1 15.3 8.3 11.1   15.7 17.4  


Varinace Table

  Q1FY23 Q1FY23E Q1FY22 YoY (%) Q4FY22 QoQ (%)   Comments
General Insurance 3119.0 2943.3 2,494.4 25.0 3,299.8 -5.5   Excluding crop & government business, premium accretion remained healthy
Life Insurance 4369.0 3521.7 2,515.5 73.7 5,719 -23.6   Individual business accretion robust
Net premium earned 7488.0 6465.0 5,009.8 49.5 9,018.5 -17.0    
Investment and other income 554.1 2251.1 2,312 -76.0 1,966 -71.8    
Reinsurance Ceded 1307.4 258.6 261 400.0 746 75.3    
Reserve for unexpired risk 50.6 -100.0 -215 -123.5 -125 -140.6    
Total Insurance 6684.2 8557.6 7,275.3 -8.1 10,363.9 -35.5    
Retail financing 9282.7 9081.4 6,743 37.7 8,630 7.6   Led by strong revival in lending business
Windmill 8.0 5.0 5.0 60.8 7.8 1.9    
Investment and others 463.2 80.0 84 452.9 126 268.6    
Total 15,889 17542.3 13,949 13.9 18,862 -15.8    
Interest and Finance Charges 2,563.8 664.6 2,190.5 17.0 2,481.3 3.3    
Other Exp 9,730.9 13350.6 9,991.9 -2.6 12,918.1 -24.7    
Total Expenses 12,294.8 14015.2 12,182.4 0.9 15,399.5 -20.2    
PBT 3,593.9 3527.1 1,767.1 103.4 3,462.2 3.8    
PAT 1,309.4 1345.9 832.8 57.2 1,346.1 -2.7   Lower provisioning in lending business 




I/We, Kajal Gandhi, CA, Vishal Narnolia, MBA and Sameer Sawant, MBA, Pravin Mule, MBA, M.com, Research Analysts Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.               


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