ICICI Direct is bullish on Bajaj Finserv has recommended buy rating on the stock with a target price of Rs 6500 in its research report dated May 18, 2018.
ICICI Direct's research report on Bajaj Finserv
Consolidated revenue grew 25% YoY to Rs 8829 crore, primarily led by healthy growth in finance business. LI and GI posted healthy growth in premium at 19% and 22% YoY. Consolidated PAT grew 28% YoY to Rs 686 crore, led lending business, partly offset by life insurance Continued strong growth at 34% YoY in AUM and 36.5% in topline, supported consolidated PAT. Asset quality continue to remain steady Post slower Q3FY18, growth in GI revived at 22% YoY to Rs 2764 crore with crop insurance at Rs 580 crore. However, PBT growth remained slower at 11% YoY to Rs 274 crore, led by 70 bps YoY increase in combined ratio at 93.4%. Underwriting profit came in at Rs 30 crore LI premium growth came in at 19% YoY to Rs 2670 crore. New business premium grew 20% YoY to Rs 1394 crore, led by 23% YoY increase in individual rated business to Rs 474 crore and 19% YoY increase in group new business to Rs 900 crore. Shareholder’s PAT was at Rs 171 crore vs. Rs 198 crore in Q4FY17, due to higher expenses.
Outlook
We remain positive on the stock due to 1) continued traction in AUM with control on opex and asset quality, 2) strong and profitable growth in general insurance and 3) growth in new business premium, especially in individual segment. Factoring in fundamental strength, we revise our target to Rs 6500 (Rs 6000), based on SOTP valuation, implying a multiple of 21.4x on FY20E consolidated earnings. Consequently, we maintain BUY.
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