2 financial stocks to buy for decent returns in a year, says ICICI Direct

Why can Bajaj Finance be a good bet?

Bajaj Finance is an important player in the field of consumer credit, but it has also embarked on other credit segments such as housing, financing of SMEs, etc. when the opportunity arises.

ICICI Direct has set a target price of Rs 8,950 on the Bajaj Finance share, against the current market price of Rs 7,780.

Why can Bajaj Finance be a good bet?

ICICI believes it is currently adding 10 lakh portfolios each month, with adequate capital of 28.5%, a focus on technology, and a turnaround in customer acquisition trend, all pointing to further development. From S2FY22, the quality of assets should stabilize, with a faster recovery and a gradual release.

Bajaj Finance’s share price has increased 7.2 times over the past five years, from around 1,100 in September 2016 to around 7,800 in September 2021.

Bajaj Finance price target and valuation

Bajaj Finance price target and valuation

“Bajaj Finance’s share price has risen approximately 7.2 times over the past five years. Taking into account the agility of management for product development and process modification as the situation requires We maintain our PURCHASE rating on the title.

Target price and valuation: We remain positive and taking into account high NIMs with risk adjusted growth, we value the stock at ~ 10x P / ABV on FY23E and revise our target price to Rs 8,950 from Rs 6,900 earlier. Premium valuations remain, ”the brokerage said.

Main triggers for future value for money:

  • To boost values, switch from the status of pure lender to that of fintech.
  • RoE is expected to return to 15% and RoA to around 3%.
  • A lean operational approach and solid growth projections.

Alternative Action Idea: In addition to BAF, we prefer HDFC Ltd in our BFSI coverage.

HDFC Ltd is the largest housing finance company in India, with a loan portfolio of 4.98 lakh crore. Through its subsidiaries, the company is also present in other categories of financial services.

Why can Bajaj Finserv be a good bet?

Why can Bajaj Finserv be a good bet?

Bajaj Finserv is a financial conglomerate with interests in finance (Bajaj Finance), life insurance (Bajaj Life Insurance) and general insurance (Bajaj General Insurance).

ICICI Direct has set a target price of Rs 20,200 on the Bajaj Finserv share, against the current market price of Rs 17,510.

Why Bajaj Finserv Bajaj Finserv can be a good bet?

  • Long-term benefits include traction in insurance and digitization in financing.
  • Bajaj Finance launched its portfolio business in July 2021, and by FY23 it expects to have onboard 2.5 million clients.
  • The growth in premiums of 20% in non-life insurance for April-July21 allows a market share gain of 30 basis points to 7.9%.
  • Life insurance premiums increased 40% year over year in April-July21, overtaking the industry.
  • A foray into the mutual fund industry would add value to the franchisee’s overall operations.

Bajaj Finserv’s share price has risen nearly 6 times over the past five years, from 2,900 in September 2016 to around 18,000 per share today.

Price target and valuation of Bajaj Finserv

Price target and valuation of Bajaj Finserv

“Bajaj Finserv’s share price has risen approximately 6 times over the past five years. We are upgrading our stock rating from HOLD to BUY. Price target and valuation: We value Finserv at approximately 45 times EPS for fiscal 23 to arrive at a revised target price of Rs 20,200 per share against Rs 13,500 earlier.

Main triggers for future value for money:

  • For fiscal years 22E and 23E, expect AUM growth of 20% and 22%, respectively, and PAT growth of 30% and 45%.
  • From S2FY22, the quality of assets will stabilize.
  • In the life and casualty insurance industry, robust premium growth and a carefully chosen product line will drive business growth and earnings.
Disclaimer

Disclaimer

The above actions are taken from the ICICI Direct brokerage report. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author and the brokerage are not responsible for any losses caused as a result of decisions based on the article.

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