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Bajaj Finance - Q2FY21 Result Update - ICICI Securities

Posted On: 2020-10-21 22:39:15

Bajaj Finance reported an in line performance with elevated Covid provisions, lower opex that enabled higher-than-expected operating profit and standstill status kept asset quality stable. The moratorium book came down from 15.7% in the previous quarter to 8.0% in September 2020. Consolidated AUM witnessed growth of 1% YoY to Rs. 137300 crore, declining 1% sequentially. AUM for mortgage segment increased 15% YoY from highs of 30-40% in the past and was flat QoQ to Rs. 45989 crore as of September 30, 2020. Consumer B2B fell 6% QoQ, 19%YoY to Rs. 20605 crore. Consumer B2C de-grew 3% QoQ but remained just up 5% YoY.

Valuation & Outlook

Leaving the year FY21 behind and front loading provisions for asset quality stress, the management has guided for strong improvement from FY22E. They believe transformation has led to lower operating costs, while business velocity to surge ahead. As per the management, post March, April 2021 when normalcy is likely to be achieved: 1) growth is expected to accelerate to 25-27% (we factor in 19% growth in FY22) and 2) credit costs for FY22 to be in 160-180 bps of average loans (we have factored 220 bps). Factoring in these two changes along with tight cost to income ratio trend, our FY22E PAT estimate has been revised upwards by 23% to Rs. 5723 crore. Given lower moratorium and meagre restructuring till date, return ratios are well placed to witness improvement ahead. RoE seen back to ~15% and RoA at 2.2% in FY22E. At 5.1x FY22E ABV, the stock valuations look reasonable for long term earnings growth guidance of 23-24%. We upgrade the stock from HOLD to BUY and revise our target price to Rs. 3850, valuing the stock at ~6x FY22E ABV.

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Shares of Bajaj Finance Limited was last trading in BSE at Rs.3233.25 as compared to the previous close of Rs. 3262.1. The total number of shares traded during the day was 237773 in over 21519 trades.

The stock hit an intraday high of Rs. 3295 and intraday low of 3101.6. The net turnover during the day was Rs. 763032000.

Source: Equity Bulls

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