Bajaj Finserv is a long term play: Deven Choksey

Deven Choksey, MD, K R Choksey Securities in a chat with ET Now gives his outlook on Bajaj Auto, Maruti Suzuki and Bajaj Finserv.

You have two picks, automobile picks, Bajaj Auto and Maruti Suzuki. You also have a Bajaj Finserv in there. What is your thought process in picking these stocks?

The important aspect about Bajaj Auto and Maruti is that both these stocks are ready for a good amount of growth. Both of them have given some amount of directions already. In case of Bajaj Auto, they are already talking about 4 million vehicles in this particular financial year, that is for the direction which has come out.

If you translate this particular direction into numbers, then you probably find that Bajaj Auto is today trading at around 13 odd times forward price earning multiples. So that makes it very comfortable going ahead with this company. About Maruti, once again they have talked about 12-13% growth.

Similarly if you translate this into numbers, then probably you find that again this stock is trading at around 13 forward earning multiples. The most important aspect is that the GDP growth is at around 8-8.5%. Then in such situation what we are probably going to see is that automobile companies probably in upwards of mid-13 which is more than 15% to 17% growth should be achieved easily by them.

In case of Bajaj Auto, it is even going to be more because of aggressive launches of models with a good price. So this is why we like these two companies into the large caps in the auto space.

What does this Bajaj Finserv hold? How much of that insurance in life and non-life does it hold and should they decide to go public, what could happen to these Finserv Holdings?

As far as life and non-life is concerned, the value of Bajaj Life whereas we took it Bajaj Finserv, we consider that in the total price, it is around 76% when we calculate the SOTP. The non-life is about 9%, NBFC business about 4%, then others include about 11%.

The important aspect is that in this particular company’s case, life insurance business has already started making profit which contributes significantly to the price of Bajaj Finserv. The other aspect is that if you translate once again this particular profit, you ally with some of the part valuation, then in such situation probably at 74% holding of Bajaj Group into this company, this translates to somewhere around Rs. 475 per share valuation and if we consider that going forward the alliance would probably convert their call options into the equity, then this particular holding of Bajaj Group will come down to 51%.

Then in situation, the valuation per share could work out to somewhere around Rs. 307 per share. So we really like this particular company more because it has got really a good insurance business model into it and it is growing very steadily.

Going forward when they convert the call options, the valuation would probably start looking smartly as far as Bajaj Finserv is concerned. That is how we like this company but it is a long term play. It is not essentially a short term play. Short term figure could be this one but otherwise, it is a long term play.