Buy Bajaj Holdings & Investment, target Rs 3481 : Sharekhan
Updated: Sep 29, 2017, 11.39 AM IST
Sharekhan has a buy on Bajaj Holdings & Investment Ltd. with a target price of Rs 3481. The current market price of Bajaj Holdings & Investment is Rs 2891.
Bajaj Holdings and Investment Limited (BHIL) holds Bajaj Group's investments in two flagship companies - Bajaj Auto Limited (BAL; 31.54% stake) and Bajaj Finserv (BFS; 39.29% stake). BHIL also has an investment portfolio with a market value of around Rs 6,926 crore in other equity and fixed income securities for the quarter ended June 2017.
Going ahead, BAL's volume growth is expected to pick up in the exports and domestic markets. Exports grew 6% in YTD FY2018 (April 2017-August 2017), attributable to recovery in key markets of Africa and Latin America, driven by stabilisation of crude oil prices, improving dollar availability and gradual recovery in economies. Consequently, BAL has raised export volume guidance from 1.6 million units earlier to 1.7 million units for FY2018. The domestic motorcycle industry has also gathered momentum, growing in double digits for July and August 2017, attributable to normal monsoon and key concerns of transition to BS4 emission norms and GST rollout being addressed. Given the improved domestic industry's scenario and favourable base for H2FY2018, Sharekhan expect BAL's volume growth to improve and expect 5% growth in FY2018 as against earlier assumption of flat growth.
BFS has shown healthy performance across all three of its businesses in terms of growth for the quarter ending June 2017. BFS's life insurance business, BALIC reported decent growth in gross written premiums (GWP) at 14.9% YoY, while the general insurance business - BAGIC witnessed healthy 29.2% YoY growth in GWP. The lending arm, Bajaj Finance Limited (BAF) also reported increased momentum in its loan book growth. The brokerage house expects the loan book to maintain healthy growth in the next few years, while steps taken by management to diversify its income streams in the general insurance space and focus on strengthening the life insurance distribution channel would help the company to improve its business traction.
Given the strategic nature of BHIL's investments (BAL and BFS), Sharekhan has given a holding company discount of 50% to its equity investments. Liquid investments have been valued at cost. Further, the outlook for BFS is encouraging as BAGIC and BAF are showing improved performances and are likely to maintain the high-growth trajectory. Secondly, visibility for BAL's volume growth has also improved for both the exports as well as domestic markets. So, Sharekhan has revised upwards BAL's price target (PT) to Rs.3,470. Consequently, Sharekhan has revised our PT for BHIL upwards to Rs.3,481. The brokerage house maintains 'Buy' recommendation on the stock.
Bajaj Holdings and Investment Limited (BHIL) holds Bajaj Group's investments in two flagship companies - Bajaj Auto Limited (BAL; 31.54% stake) and Bajaj Finserv (BFS; 39.29% stake). BHIL also has an investment portfolio with a market value of around Rs 6,926 crore in other equity and fixed income securities for the quarter ended June 2017.
Going ahead, BAL's volume growth is expected to pick up in the exports and domestic markets. Exports grew 6% in YTD FY2018 (April 2017-August 2017), attributable to recovery in key markets of Africa and Latin America, driven by stabilisation of crude oil prices, improving dollar availability and gradual recovery in economies. Consequently, BAL has raised export volume guidance from 1.6 million units earlier to 1.7 million units for FY2018. The domestic motorcycle industry has also gathered momentum, growing in double digits for July and August 2017, attributable to normal monsoon and key concerns of transition to BS4 emission norms and GST rollout being addressed. Given the improved domestic industry's scenario and favourable base for H2FY2018, Sharekhan expect BAL's volume growth to improve and expect 5% growth in FY2018 as against earlier assumption of flat growth.
BFS has shown healthy performance across all three of its businesses in terms of growth for the quarter ending June 2017. BFS's life insurance business, BALIC reported decent growth in gross written premiums (GWP) at 14.9% YoY, while the general insurance business - BAGIC witnessed healthy 29.2% YoY growth in GWP. The lending arm, Bajaj Finance Limited (BAF) also reported increased momentum in its loan book growth. The brokerage house expects the loan book to maintain healthy growth in the next few years, while steps taken by management to diversify its income streams in the general insurance space and focus on strengthening the life insurance distribution channel would help the company to improve its business traction.
Given the strategic nature of BHIL's investments (BAL and BFS), Sharekhan has given a holding company discount of 50% to its equity investments. Liquid investments have been valued at cost. Further, the outlook for BFS is encouraging as BAGIC and BAF are showing improved performances and are likely to maintain the high-growth trajectory. Secondly, visibility for BAL's volume growth has also improved for both the exports as well as domestic markets. So, Sharekhan has revised upwards BAL's price target (PT) to Rs.3,470. Consequently, Sharekhan has revised our PT for BHIL upwards to Rs.3,481. The brokerage house maintains 'Buy' recommendation on the stock.
