Bajaj Finance Ltd. share price target

Bajaj Finance (BAF) reported 7% YoY AUM growth in Q1FY21.

operating leverage. While current asset quality masks true picture on delinquencies, asset quality management stands impressive with (a) morat AUMs at 18% (including flexi loans morat) (b) elevated COVID provisioning of Rs24bn covering 11% of moratorium book (c) collection ramp-up (added 2500 staff to 4500 existing collection staff), collections up 8-10% in each Jun- Jul (d)improving bounce rates by 3-4% every month from past 3 months (c)...

Bajaj Finance Ltd (BFL) reported mixed Q1FY20 numbers, with tepid business growth, but a q-o-q improvement in asset quality and a decline in the moratorium to 15.7% of AUM from 27%, which is a positive. Assets under management (AUM) stood at Rs. 138,055 crore, down 6% q-o-q due to steps like more stringent loan-to-value ratios (LTVs), tightened credit filters, etc. which indicated a cautious outlook on growth by the management. However, growth guidance was moderated by 10-12% and a higher credit cost guidance of 100-110 bps (against ~80-100 BPS earlier) for FY21 were key notables. Net Interest Income (NII, calculated) stood at Rs 4150 crore, up by 12.5% y-o-y but was down by 11.3% on q-o-q...

21 July 2020 Bajaj Finance (BAF)s 1QFY21 PAT declined ~20% YoY to INR9.6b (8% beat). Other operating income of INR8.6b (v/s est. of INR4.6b) led to PPoP (+25% YoY) beat of 12%. NII and opex were in line with expectations. As of June end, ~16% of the consol. (INR217b), as against 27% in April (INR386b). The reduction was driven by the Auto, Rural, and SME segments (refer to Exhibit 9). The conversion of term loans into flexi loans led to ~22% (INR36b) of overall decline. GNPA declined 20bp QoQ to 1.4%, aided by high write-off of INR4b. PCR increased 450bp QoQ to 65%.

Rating Action: Moody's downgrades India. Automobiles: May'20 Auto Sales Tractors robust, other segments weak

Q4FY20 AUM grew 27% YoY to Rs. 147,153cr. As of April 30th, 27% of the consolidated AUM was under mortarium. Net interest income rose 38.4% YoY to Rs. 4,679cr in 4QFY20. However, PAT fell 19.4% YoY due to high provisioning (+377.4% YoY). Excluding COVID-19 provisioning, adjusted PAT rose 37.9% YoY. Capital adequacy ratio declined to 25.0% vs. 26.8% in Q3FY20, and TierI ratio also deteriorated to 21.3% vs. 23.2% in Q3FY20. Recording strong topline performance in this quarter we believe that the heavy provisioning will give enough buffer in this challenging...

We recommend a SELL on BAJAJ FINANCE with a Target Price of Rs 1,636, a downside of 9% from CMP of Rs.1,798 and Stop Loss Rs 1,888

BFL is diversified financial services company focused on Consumer, Rural, SME, Commercial, Mortgages and Payments .It is present in 1,035 urban locations and 1,357 rural locations in India with over 1,14,400+ points of sale .Company has large customer franchise of 42.60 MM with loans cross sell franchise of 24.13 MM. Company has AUM mix of Consumer: Rural: SME: Commercial: Mortgages stood at...

(down 41%QoQ/19%YoY) for BAF. The 81-day quarter witnessed 5%QoQ growth in customer franchise, 1.4%QoQ/27%YoY growth in AUM translating into 3%QoQ/38%YoY increase in NII. Steady NII traction and lower opex (declined 5%QoQ) despite collection infra ramp-up aided healthy operating profit (up 8%QoQ/46%YoY). While inherent unsecured short tenure business stands susceptible to pandemic shocks, incremental asset quality deterioration should not exasperate as: (a) 68% of customers under morat...