Buy Bajaj Finserv, target of Rs 687: Sharekhan

Sharekhan has recommended a buy rating on Bajaj Finserv with a target price of Rs 687 in its July 11, 2008 research report. "The consolidated top line of Bajaj Finserv declined by 7.7% to Rs 67.1 crore in Q1FY2009 from Rs 72.7 crore in Q1FY2008. The company posted a net loss of Rs 36.2 crore during the quarter as compared with a net loss of Rs 4.8 crore in Q1FY2008. Factors like high upfront costs, decline in investment portfolio and lower volume growth affected the profits of the company in Q1FY2009."

"We value the life insurance business based on its new business-achieved profits and the general insurance business based on its net worth. However, the growth in the life insurance business is expected to decelerate in view of the slowdown in the demand for ULIP products due to uncertain market conditions. The margins too are expected to remain under pressure due to increasing costs and declining volumes. The company holds a 40.53% stake in BAFL. At the current market price of Rs 476, the stock is a good value buy. We put a Buy recommendation on Bajaj Finserv with a price target of Rs 687 based on our sum-of-the-parts valuation," says Sharekhan's research report.

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