Bajaj Finance Ltd. – Multibagger Analysis

2 Lakh to 1 Crore!

This stock really went up 50X & became a Super Multibagger.  Since the Valuation change it is No Longer a Multibagger in our view.  You can check other stocks from our latest Multibaggers Subscription where we released Similar Financial Multibagger. 

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YOU CAN READ HERE HOW WE FIND SUPER MULTIBAGGERS WARREN BUFFET WAY!

BAJAJ FINANCE

We can check whether it has Ampere ahead based on our Intrinsic Valuations. Bajaj Finserv Limited, a part of Bajaj Holdings & Investments Limited, is an Indian financial services company focused on lending, asset management, wealth management and insurance. Bajaj Finance Ltd is the holding company for various financial services businesses under the Bajaj Group, which operates in India. The company services myriad customers by providing solutions for asset acquisition through financing. The company also makes investments in renewable energy through one of its subsidiaries. It operates under a single re portable segment, financing. Among its lending operations, the company is engaged in consumer lending, commercial lending, loans against securities, mortgages, and lending to small and medium enterprises. All of its revenue is generated from India.

Old Website: http://www.bajajautofinance.com/

New Website: https://www.bajajfinserv.in/

Brief: Bajaj Finance Limited is a financial services company that operates branches in India, which provide an assortment of financial services.

bajaj finance
History of Consistently Increasing Sales, Earnings & Cash Flow
Yes, the company is displaying 20% CAGR Growth in the past 5 years.
Current year shows 40% growth in EPS.
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Durable Competitive Advantage (Economic Moat)
High Loan Amount of 10 Lakhs, Fast Application Process, Flexibility in Payments,
Sophisticated Tools, Reputation of Bajaj are the Key Differentiator of
Bajaj Finance to competitors.
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Future Growth Drivers
NBFC, Insurance are booming businesses in India & currently at only 5% level
compared to peers in USA, UK, Australia etc. The CAGR 10% of industrial growth
can easily contribute 20-30% returns on this company making it a
Compounded Multibagger of future.
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Conservative Debt (long term debt < 3*Net Profit)
Slightly high debt but covered by the Interest Coverage Ratio
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Return on Equity must be Above Average
Above 12% is good ROE & Sign of running a healthy business while keeping in mind the
Shareholders wealth creation too. Company have 24% ROE.
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Power of Brand
Bajaj is a reputed brand in India & Definitely this Trust will attract & retain customers
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NOT Other Income Jump
Company is creating Profits through Operating Efficiency & Not through Sale of Assets
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Low CAPEX required to maintain current operations
Yes, company does not buy own buildings – but rapidly scale-up & scale-down using
leased/rented premises which frees from Heavy Capital Allocations
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Management is holding / buying the stock
Yes, increasing shares by Promoters
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Price is Under Valued (Intrinsic Value)
Intrinsic Value Discount stands at 70%
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Stock Price is consolidating
Closer to Highs. Investors can buy 70-100% at current rate based on their level of
confidence & conservation minds.
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5X 5Y – 20X 10Y – Returns
Considering the current growth rate it can be a 500% multibagger in 5 years & also
2000% multibagger in 10 year time period through power of compounding, PE resizing etc.
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Historical Growth
Stock Price is growing in par with EPS Growth & We do not see any reputation issue
on conducted fraud checks. This can harness huge market share in future.
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Intrinsic Value

4800.00

Current Market Price

Rs. 150 [Dividend Adjusted]

EPS Growth Rate

40% (Very High, Very Good)

ROE

24% (Above Average, Good)

Current Liabilities

1694 Crore (Raises a concern as it is little above 3 times latest net profit)

Rationale

Bajaj Finance is a Multi-faceted Finance company focusing on Mutual Funds, Personal Loans, Online Trading, Insurance & Investment Services for retail & corporate clients.  The Finance Sector is having 12% CAGR growth & well poised branding of Bajaj will make this company a Multibagger in the future.  The Niche Moat of the company lies on the repeating customers who are locked with long term portfolios & software systems which enable Online mutual fund purchase, Online loan payment, Online consultation etc.   The second Moat is through the Connected Financing through Bajaj Auto-retailers – this saves lot of Customer Acquisition costs for the company.  Bajaj with the Pulsar series of bikes have a front-runner position and attracting increased sales & new show-rooms across the country – this growth would help Bajaj Finance to amass revenue & profits.

At the current price it is having a 90% discount to Intrinsic Value which makes it a Well positioned Value Pick style of Warren Buffet.

Stock Price Consolidation

The stock price is in the up-move as it is a Declared Blue Chip Multibagger.  But, considering PE around 12, Book Value Ration just 0.5, I see it as a Good Price to buy & add on declines.

Expected Returns

Taking average EPS Growth as 30% per year, PE Ratio @ 20, we can expect 20 Times returns in 10 years.

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