Buy Bajaj Finance; target of Rs 2300: Motilal Oswal

Motilal Oswal's research report on Bajaj Finance

We recently met with the heads of Bajaj Finance’s (BAF) SME, Rural, Commercial and Risk Management operations. We were enthused by the company’s efforts to lay the foundation for the next phase of its journey – BFL 2.0. Furthermore, the recent QIP equips the company with the much-needed ammunition to sustain its 30%+ AUM growth trajectory over the foreseeable future, and importantly, without any EPS dilution.

Outlook

For FY18-20, while our new EPS estimates are marginally accretive, our BVPS estimates have been upgraded by 20-30%. We believe that valuations must be viewed in relation to the overall market and the company’s continued outperformance versus peers. Confident about management’s planning and execution, we expect BAF to outperform its peers, and thus, do not foresee any meaningful multiple contraction over the medium term. We raise our target price to INR2,300 (6.0x Sep 2019E BVPS). Buy.

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