Home >Markets >Stock Markets >Why Motilal Oswal is bullish on Bajaj Finance shares despite 90% rise in one year

Bajaj Finance shares have recently surged to new highs in the past few sessions with the stock up around 90% in one year. It recently surpassed India's largest lender SBI in terms of market value. Domestic brokerage and research firm Motilal Oswal has retained its ‘Buy’ rating on the stock and sees further upside on positive outlook. It expects the company to be able to deliver a pre-covid quarterly run-rate in AUM growth for the remainder of FY22.

Bajaj Finserv has got an in-principle approval from SEBI for sponsoring a Mutual Fund (MF). While the opportunity is huge, the brokerage said that given the under penetration and financialization of savings in the country, the competitive intensity in the industry is high with 44 players.

“The return ratios have been consistent and also the highest in our coverage universe (excluding gold financiers). Given the strong recovery post relaxation of the lockdowns and the healthy progress made in its digital transformation program (including wallets and payments), we reiterate our Buy rating, with a target price of 7,700 per share," Motilal Oswal said in a note. 

Barring any new Covid-related disruptions, it expects Bajaj Finance to deliver around 21% assets under management (AUM) growth in FY22E and 25% CAGR thereafter. 

The financial services group already had lending products, general and health insurance, life insurance services. “With an asset management company (AMC) in the fold, the missing piece of a captive MF investment product (other than deposits/traditional savings/ULIP products) will also be complete. This should aid the fee and commission (particularly distribution) income," the note added.

Motilal Oswal expects margin to likely see a sharp improvement in FY22E on lower cost of funds, reduced liquidity, and a favorable base due to interest reversals.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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