Stocks To Buy: Jefferies sees 24% upside potential for this Bajaj Group stock

The brokerage said Bajaj Finserv, which is the holding company of the group’s financial businesses, is poised to benefit from:

• Tailwinds of lower rates for Bajaj Finance
• Improving profitability in Bajaj Allianz Life Insurance Company Ltd.
• Profitable growth, along with motor third-party insurance price hike in Bajaj Allianz General Insurance Company.

Jefferies said it sees limited impact from the exit of Allianz from the life insurance JV with Bajaj Finserv and the subsequent tie-up of the former with Jio Financial Services.In July this year, Jio Financial Services had announced that it has formed a 50:50 domestic reinsurance Joint Venture with Allianz to serve India’s growing market. The two companies also entered into a non-binding agreement for setting up equally owned joint ventures for both general and life insurance businesses in India.

Jefferies expects Bajaj Finserv’s core earnings to grow at a Compounded Annual Growth Rate (CAGR) of 22%

Jefferies said it expects 22% compound annual growth rate (CAGR) in core earnings.Bajaj Finserv reported a 30.5% increase in its first quarter net profit at ₹2,789 crore from ₹2,138 crore in the previous year.

Its life insurance gross written premium increased 9% from the previous year and declined 41% from the previous quarter.

Meanwhile, its general insurance gross written premium too increased 9% from last fiscal but declined 20% sequentially.

Of the 15 analysts that have coverage on the stock, nine have a “buy” rating, four have a “hold” rating and two have “sell” ratings.

Bajaj Finserv shares ended the previous session 0.7% lower. The stock has gained 24.3% this year, so far.

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