Bajaj Finance Ltd. share price target

Bajaj Finance Ltd.s disbursements to small businesses and consumers fell on stricter lending criteria amid a consumption slowdown even as the non-bank lender met profit estimates in the June quarter. Bajaj Finance has continued to post robust 43% growth in the net profit to Rs 1195.25 for the...

Strong quarter; early signs of concern. Maintain Accumulate Bajaj Finance posted another strong quarter, with PAT growing at 43% YoY on an AUM growth of 41%, (38% YoY excluding IPO financing). The negatives were a 6 bps increase in GNPA and caution on 2W/3W and digital products. The two account for 11% of the book. Except the mortgage portfolio, all portfolios witnessed a deterioration in asset quality. The GNPA rose 61% YoY, faster than the book growth. We have reduced our earnings by 3%/2% in FY20 and FY21 respectively to factor higher credit costs. We maintain our rating and multiple,...

Bajaj Finance continued its healthy performance, with loan, earnings growth momentum remaining healthy, though below our expectation. Consolidated AUM including housing witnessed growth of 41% YoY to | 128898 crore, largely led by rural & consumer B2B auto segment. SME grew 36% YoY to | 16334 crore while consumer segment increased 42.5% YoY to | 49883 crore. Housing subsidiary credit increased 48% QoQ to | 21054 crore. Standalone Bajaj Finance AUM grew 25% YoY to | 107949 crore. Consolidated AUM mix of consumer: rural: SME: commercial: mortgages...

Professor Krishnamurthy Subramanian released his first Economic Survey in which he has outlined an investment driven path to US$ 5tn economy by 2025. The reforms undertaken in the last 5 years along with new set of reforms outlined in the report will go a long way in achieving the ambitious target. Notably, the Survey also reiterates that fiscal prudence will drive real interest rates lower and thus lead to higher savings rate to achieve the virtuous cycle of...

New products, stable spreads and tech-led throughput increase Key takeaways from our analysis of Bajaj Finance's (BAF) FY19 Annual Report: (1) Strong traction in consumer finance makes ~40% of the book high-yield and high-churn, aiding faster repricing. (2) SME financing and commercial lending form sustainable scale builders, while partnerships drive granular fee income. (3) Increased fixed-rate borrowings and a prudent ALM strategy support stable spreads. (4) Productivity has increased due to the effective use of technology and analytics....

The zero cost EMI financing segment is witnessing strong competition with private banks entering the space aggressively. Though growth momentum remained strong for Bajaj Finance (41% in FY19), we believe growth and margin in this high yield segment can face headwinds, as current liquidity environment favours banks with rich CASA. Share of consumer business (low risk - high NIM) has been moderating from ~45% of AUM in FY17 to 39% of AUM in FY19, as the company tries to build portfolios of mortgage, SME, etc. Hence, margins seems difficult to sustain over 10% in the medium...

Robust results again; no visible hiccups. Maintain Accumulate With a PAT growth of 57% YoY, Bajaj Finance witnessed another highly commendable quarter. The AUM grew 41% YoY, with secular and granular growth in key businesses. It appears to have gained market share in autos, but remained steady in other segments. This is partly due to it being a dominant player in most other segments. While there is a risk of slowing consumption (and lower economic growth), we believe that 1) its market position; 2) inability of competitors to replicate its scale and model; 3) consolidation...

Business momentum (AUM up 41% YoY) continued to be strong, driven by consumer/SME segments at 56/36%. Better pricing power, growth in high-yielding loans and controlled cost of funds led to sequential NIM improvement. Operating leverage has played a key role in achieving high profitability.

Bajaj Finance continued its all-round strong performance with loan and earnings growth momentum remaining unabated. Consolidated AUM including housing saw growth of 41% YoY to | 115888 crore in line with our estimate. It was largely led by SME and consumer segment. SME grew 38% YoY to |15759 crore and consumer by 45% YoY to | 44989 crore. Rural segment, on a small base, surged 69% YoY while housing subsidiary credit increased 43% QoQ to | 17030 crore. Standalone AUM mix of consumer: rural: SME: commercial: mortgage (residual) was at 45%: 9%: 16%: 12%:...

lending, BAF financed 44% of Bajaj Auto's 2W sales, as against its runrate average of 35%, as competitive intensity weakened. For FY19, fee income more than doubled YoY to INR16.8b, while PAT grew 60% YoY to INR40b. RoE for the year increased 260bp to 22.9% Margins (calc.) were sequentially stable at 12%, with cost of funds relatively low at 8.3%. The borrowing mix remained largely stable QoQ, with the share of bank/market borrowings at 37%/50% respectively. With operational efficiency, with opex/AUM declining 30bp YoY to 4.2%. Asset quality remained stable, with a GNPL ratio of 1.54% and a PCR of...