Bajaj Finserv shares: Jefferies initiates coverage; 3 reasons why it sees 24% upside

Bajaj Finserv shares: Overseas brokerage firm Jefferies has initiated coverage on Bajaj Finserv and it sees up to 24 per cent upside in the stock, citing three key reasons that may fuel the rally in the bluechip counter in the coming days. Shares of Bajaj Finserv marched higher on the back of a positive brokerage report.

“Bajaj Finserv, the holding company of the group’s financial businesses, is poised to benefit from the tailwinds of lower rates at Bajaj Finance (BAF), improving profitability at Bajaj Allianz Life Insurance (BALIC), and profitable growth/motor target price hike at Bajaj Allianz General Insurance (BAGIC)," said Jefferies in its initiating coverage report.

"New ventures like mutual funds, healthcare, tech, and ventures can add option value. We see limited impact from the exit of Allianz and the entry of Jio Financial Services,” Jefferies said in its report. The brokerage firm expects Bajaj Finance is likely to report a 22 per cent CAGR growth in its earnings and its lending and non-lending platforms are relatively insulated from economic cycles.

Bajaj Finserv owns 51 per cent stake in Bajaj Finance, the largest non-banking financial company (NBFC) in the county and the brokerage has a 'buy' rating on Bajaj Finance with a target price of Rs 1,100. It owns a 74 per cent stake in Bajaj Allianz, whose profit may grow at 14 per cent CAGR.

Bajaj Finserv's new businesses- Bajaj Asset Management, Baja Finserv Health and Bajaj Finserv Direct are incurring loses because of lower scale of operations. However, the overseas brokerage sees opportunities in these sectors are larget and execution may add to its leverage. However, rapid expansion plans for Jio Financial Services and public sectors player is the only risk for it.

Jefferies has a 'buy' rating on Bajaj Finserv with a target price of Rs 2,420 apeice. The brokerage sees up to  23.6 per cent uspide in the stock against its previous close at Rs 1957.50. The stock rose more than 2 per cent to Rs 1998.75 on Thursday, commanding a total market capitalization close to Rs 3.2 lakh crore.