Month: September 2021

Why Bajaj Finance can be a good bet?

Bajaj Finance is a significant participant in the consumer finance area, but it has also dabbled in other lending segments such as housing, SME financing, and so on when chances arise.

ICICI Direct has set a price target of Rs 8950 on the stock of Bajaj Finance, as against the current market price of Rs 7780.

Why Bajaj Finance can be a good bet?

ICICI believes that it is currently adding 10 lakh wallets every month, with adequate capital of 28.5 percent, a concentration on technology, and a turnaround in the client acquisition trend all pointing to future development. From H2FY22 onwards, asset quality is expected to stabilise, with a faster recovery and gradual unlocking.

The share price of Bajaj Finance has increased by 7.2 times in the last five years, from roughly 1,100 in September 2016 to around 7800 in September 2021.

Target Price and Valuation of Bajaj Finance

“Bajaj Finance’s share price has grown by ~7.2x over the past five years. Factoring in management agility towards product development and process modification to suit the situation. We maintain our BUY rating on the stock.

Target Price and Valuation: We remain positive and factoring in high NIMs with risk adjusted growth we value the stock at ~10x P/ABV on FY23E and revise our target price to Rs 8950 from Rs 6900 earlier. Premium valuations stay,” the brokerage has said.

Key triggers for future price-performance:

• To boost values, make the switch from being a pure lender to fin-tech.
• RoE is expected to return to 15% and RoA to around 3%.
• A leaner operational approach and solid growth projections.

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

HDFC Ltd is India’s largest housing financing firm, with a loan portfolio of $ 4.98 lakh crore. Through its subsidiaries, the corporation also has a presence in other financial services categories.

Why Bajaj Finserv can be a good bet?

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

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

Why Bajaj Finserv Bajaj Finserv can be a good bet?

• Long-term positives include traction in insurance and digitalization in financing.
• Bajaj Finance launched its wallet business in July 2021, and by FY23, it hopes to have onboarded 2.5 crore clients.
• Premium growth of 20% in general insurance for April-July21 helps market share gain of 30 basis points to 7.9%.
• Premiums for life insurance increased by 40% year over year in April-July21, outpacing the industry.
• A foray into the mutual fund business would add value to the franchisee’s overall operation.

The share price of Bajaj Finserv has increased by nearly 6 times in the last five years, from 2,900 in September 2016 to around 18,000 per share now.

Target Price and Valuation of Bajaj Finserv

“Bajaj Finserv’s share price has grown by ~6x over the past five years. We upgrade our rating on the stock from HOLD to BUY. Target Price and Valuation: We value Finserv at ~45x FY23 EPS to arrive at a revised Target Price of Rs 20200 per share from Rs 13500 earlier.

Key triggers for future price-performance:

• For FY22E and FY23E, expect AUM growth of 20% and 22%, respectively, and PAT growth of 30% and 45 percent.
• From H2FY22 forward, asset quality will stabilise.
• In the life and general insurance sector, robust premium growth and a carefully chosen product mix will promote business growth and earnings.

Disclaimer

The above stocks are picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

MindTree

The company’s QoQ revenue increase was 10.02 percent, the greatest in the prior three years. Only 2.3 percent of trading sessions in the last 14 years had intraday gains of more than 5%. The stock returned 300.83 percent over three years, compared to 55.03 percent for the Nifty 100.

Over a three-year period, the stock returned 300.83 percent, while the Nifty IT provided investors a 123.58 percent return. MindTree Ltd. has declared an equity dividend of Rs 25.00 per share in the last 12 months.

Tata Consultancy Services

The TCS stock returned 83.67 percent over three years, compared to 55.03 percent for the Nifty 100 index. Over a three-year period, the stock returned 83.67 percent, while the Nifty IT delivered investors a 123.58 percent return.

The promoters own 72.19 percent of the company. The stock’s PE ratio is 41.46, indicating that it is overvalued. However, the ROCE for the previous year was 56.24 percent, which is quite impressive. TCS’s sales increased by 3.55 percent last year, but by 11.78 percent during the previous three years.

L&T Technology Services

Larsen & Toubro Technology Services, is a subsidiary that provides engineering services. Artificial Intelligence, Digital Factory, 5G, and other disruptive technology areas are among the company’s specialties.

It caters to customers all over the world. In the year 2016, the company became public. Over the last three years, sales and profit have grown by 12.28 percent and 11.21 percent, respectively. The return on investment (ROI) is 22.84 percent, which is significantly greater than its peers. However, the company has a high PE ratio of 50.38, which is unfavourable because it implies that the stock is overvalued.

Infosys

Infosys, founded in 1981, is a Large Cap business in the IT Software sector with a market capitalization of Rs 731,902.59 crore. In comparison to the Nifty 100, which returned 55.03 percent over three years, the stock returned 143.65 percent. Over a three-year period, the stock returned 143.65%, while the Nifty IT provided investors a 123.58 percent return.

With a ROE of 25.16 percent, the company has a solid track record. The effective cash conversion ratio of the corporation is 110.27. With a solid Operating Margin of 28.14 percent, the company is in good shape. Infosys has a PE ratio of 38.52, which is high and expensive in comparison. Infosys has a ROA of 20.91 percent, which is a promising sign for the future. (It’s always preferable to have higher values)

Oracle Financial Services

Only 1.74 percent of trading sessions in the last 16 years had intraday drops of more than 5%. For the last five years, the company has had no debt. The company had a QoQ sales growth of 13.76 percent, which is the greatest in the recent 3 years. The stock returned 16.38 percent over three years, compared to 55.03 percent for the Nifty 100 index. Over a three-year period, the stock returned 16.38 percent, while the Nifty IT returned 123.58 percent to investors.

A solid Dividend Yield of 5.04 percent has been maintained by the company. In FY2021, the company’s ROE was 25.72 percent, which is a strong record. The effective cash conversion ratio of the corporation is 94.23. Oracle Financial Services has a PE ratio of 22.41, which is high and overvalued in comparison.

Tata Elxsi

Only 2.97 percent of trading sessions in the last 16 years had intraday drops of more than 5%. The company’s yearly sales growth rate of 11.85% surpassed its three-year CAGR of 9.19%. The company has enough cash on hand to cover its contingent liabilities.

With a ROE of 29.95 percent, the company has a strong track record. The effective cash conversion ratio of the corporation is 118.82. With a solid Operating Margin of 28.67 percent, the company is in good shape. Tata Elxsi’s PE ratio is 85.71, which is excessive and overvalued in comparison.

Sasken Technologies

Sasken Technologies Ltd., founded in 1989, is a Small Cap business in the IT Software sector with a market capitalization of Rs 2,064.60 crore. Since the last five years, the company has had no debt. The stock returned 42.26 percent over three years, compared to 53.6 percent for the Nifty Smallcap 100. Over a three-year period, the stock returned 42.26 percent, while the Nifty IT provided investors a 123.58 percent gain.

Sasken Technologies’ PE ratio is 17.34 which is high and pricey in comparison. The ROA of Sasken Technologies is 17.13%, higher is better for future performance. Sasken Technologies has a D/E ratio of 0, indicating that the company has a low debt-to-capital ratio.

Disclaimer

The above stocks mentioned are for educational purposes only. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies and the author are not liable for any losses caused as a result of decisions based on the article.

Buy PVR, says Sharekhan

PVR Limited (PVR) is India’s largest multiplex player in terms of screen counts, which stand at 9% and 27% of its total screens in India and total multiplex screens, respectively and has the strong brand equity value. According to Sharekhan, PVR is India’s premier multiplex player that leads with the most number of screens, clocks higher revenue per screen and has a premium screen portfolio. It has 98 luxury screens (12% of total) and is expected to grow going ahead.

Except a few states including Maharashtra, Kerala, etc, many states have permitted resumption of operations in cinema halls from July 30, 2021.

“Given a huge content line-up, we believe PVR is well-placed to capitalise on strong pent-up demand and is expected to report strong revenue growth in FY2023E,” Sharekhan has said.

PVR: Strong presence, buy with a price target of Rs 1900

The broking firm sees an upside potential of nearly Rs 1,900 from the current market price of Rs 1566. “The strong recovery of occupancy rate with the release of big-starrer movies and anticipated improvement in its profitability and return ratios are expected to re-rate its multiples going ahead. We also believe the multiplex business is going to be a sustainable model in the long term given Indian movie-goers’ strong appetite for the silver screen. Hence, we initiate Buy rating on PVR with a price target of Rs. 1,900,” says broking firm Sharekhan.

Buy Zee Entertainment for a price target of Rs 400, says Sharekhan

ZEE Entertainment& Sony Pictures Networks India have entered into a non-binding term sheet to merge themselves. This will create the largest media company with a market share of 25% in India.

According to Sharekhan, the merged entity will be well-placed to maximize revenue given its strong potential to reach a larger number of advertisers. Synergies would have an impact of 6-10% on revenue.

Zee Entertainment to benefit from merger

According to Sharekhan, the proposed merger would be a strategic fit from a revenue perspective as it would strengthen Zee Entertainment’s portfolio with sport, kids and English movie properties.

“Further, with the infusion of growth capital of $1.6 billion by Sony Pictures, the combined entity’s cash balance would increase to $1.8 billion, which would be used to accelerate its digital platform growth and invest in premier content including sports. We believe that corporate governance concerns will get addressed with the controlling stake of Sony Pictures and this will trigger multiple re-ratings for Zee Entertainment. The stock is currently trading at a reasonable valuation at 20x/18x of FY2023E/FY2024E earnings estimates. Hence, we maintain a Buy rating on Zee Entertainment with a revised rice target of Rs. 400,” the brokerage has said.

Disclaimer

The above stocks are picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.