Buy Bajaj Finserv; target of Rs 1650: Sharekhan

Sharekhan's research report on Bajaj Finserv

Bajaj Allianz Life Insurance reported healthy growth in Annualized New Business Premium Equivalent (APE) at 18% y-o-y, while renewal premium grew by 30% y-o-y. VNB (Value of New business) grew by 38% y-o-y to Rs. 210 crore led by improved product mix and VNB margins were at 14.8% vs 12.6% in Q3FY22 & 15.2% in Q2FY23. Bajaj General Insurance’s gross direct premium income grew by 29% y-o-y. Net earned premium grew by 8% y-o-y. Claims ratio were lower sequentially to 72.1% vs 75.5% qoq and 69.6% y-o-y. Combined ratio at 100.3% vs 98.9% Y-o-y and 99.8% q-o-q. Underwriting losses stood at Rs. 40 crore versus Rs. 5 crore profit in Q3FY22 and Rs 18 crore loss q-o-q. PAT de-grew by 9% y-o-y. Lower PAT is attributable to higher combined ratio and lower realized gains. On the lending business side, Bajaj Finance reported in-line performance with earnings growth at 40% y-o-y in Q3FY23 driven by strong operating profits growth (24% y-o-y) and a decline in credit cost by 20% y-o-y.

Outlook

We maintain a Buy rating on the stock with a revised SOTP-based PT of Rs. 1,650.

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