Bajaj Finance Ltd. share price target

Diversity has given BFL an edge in terms of AUM growth (>38% CAGR to | 60194 crore in FY11-19) and asset quality with steady 1.2-1.6% GNPA in the past three years). PAT rose at 40% CAGR in FY11-18 to | 2646 crore (old GAAP). We introduce FY22 estimates. With provisions on rising NPA and tax adjustment, in FY20-22E, we expect NII, PAT traction to remain strong at 27%, 30% CAGR, respectively, in FY20-22E. Operating efficiency is enabling...

29 January 2020 BAFs PAT increased 52% YoY to INR16.1b (in-line) in 3QFY20. Better-than- expected margin performance led to PPoP (+44% YoY) beat of 5%. Higher- than-expected provisions led to in-line PAT (+52% YoY). (c) GS3 % was flat QoQ at ~1.6%, but write-offs were elevated at INR5.3b. (d) Overall customer base increased 24% YoY to 40.4m. We estimate ~30% PAT CAGR on the back of ~25% AUM CAGR over FY20- 22. We largely maintain our earnings estimates and expect BAF to deliver healthy RoA/RoE of ~4.3%/22%. AUM growth in consumer durables finance slowed down to 7% YoY, mirroring the consumption slowdown.

We initiate coverage on Bajaj Finance (BAF) with BUY and a Mar'21 TP of Rs 5,000.

BAF continued its strong performance in Q2, with consolidated AUM growing 38%YoY led by growth in consumer/rural/mortgages segments. PAT rose 63% YoY with improving spreads demonstrating its ability to dominate pricing and lower corporate tax.

Existing customers contributed to 70% of new loans booked vs. 66% in Q2FY19. Existing customer share was higher due to tightening of credit standards across most sales finance businesses in Q2FY20. Capital adequacy ratio marginally improved to 19.7% vs. 19.5% in Q1FY20, and Tier-I ratio stood at 15.9%, while liquidity buffer surplus (free cash and liquid investments) was at Rs. 8,043cr. Given challenging valuations and credit cost pressures, we maintain our...

Headline asset quality remained stable with GNPA ratio at 1.61% and NNPA ratio at 0.65%. Adjusted for IL&FS; exposure, GNPA, NNPA were at 1.44%, 0.52%, respectively, as of September 30, 2019. Total slippages for the quarter were at | 786 crore vs. | 702 crore QoQ while write-off was at | 293 crore. Auto finance B2B and rural B2B contributed to the same. The provision coverage ratio dipped 1%to 60%QoQ. Overall standard assets provisioning (ECL stage 1 and 2) was 91 bps (vs. 100 bps earlier). Customer franchise as of Q2FY20 rose 29% YoY to 38.7 million from 36.9...

Bajaj Finance (BFL) has posted steady results for Q2FY20 with the net interest income (NII) rose by 48.3% YOY to Rs3998 crore (we expected growth of 41.5% YOY) while the Net profit jumped by 63.1% YoY to Rs1506 crore (we expected growth of 40.8% YOY). The performance was benefitted by lower corporate tax rate. Asset under management grew smartly by 38% YoY while new loans booked during the quarter increased by 23% YoY. Asset quality during the quarter remained stable as GNPA ratio stood at 1.61% versus 1.60% in the previous...

Consolidated PAT grew 43% YoY to Rs 1,195cr in Q1FY20 characterized by continued strong AUM growth (41% YoY) coupled with stable margins/asset quality. AUM growth in consumer B2B financing was robust at 31% YoY, driven by +60 YoY growth in 2W/3W finance.

Asset under management (AUM) increased 41.2% YoY to Rs. 128,898cr in Q1FY20, in-line with the provisional numbers announced a month ago; mortgage lending up 44.7% in Q1FY20. Provisions grew 69% YoY to Rs. 551cr in Q1FY20 (vs. strong Q1FY19) GNPA/NNPA ratio stood at 1.60%/0.64% (vs. 1.54%/0.63% in Q4FY19),...

Bajaj Finance a structural play ........................................................................ 5 BAF: diversified lending model .............................................................................. 6 BAF's Consumer lending to expand at 30% CAGR over FY19-21E ............... 7 BAF's formidable play in consumer lending market ......................................... 10 Consumer credit growth intact ...................................................................... 10 Higher Bajaj Auto sales penetration to aid consumer lending ...................... 11 Distribution network to expand at 30% CAGR (FY19-21E) .......................... 11 Customer addition at 1 mn/quarter remains strong....................................... 12...