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Q3FY21 Result update - Bajaj Finserv - ICICI Direct

Posted On: 2021-01-22 22:51:15 (Time Zone: Arizona, USA)

Bajaj Finserv reported gradual revival in lending business, while insurance business continued to show healthy performance, though sequential run rate witnessed moderation. Consolidated top-line came at 9.6% YoY at Rs. 15960 crore, improved traction sequentially but still lower on YoY basis, due to moderation in lending business. Led by improvement in PAT in insurance business, consolidated earnings came up by 14.6% YoY to Rs. 1290 crore. Consolidated AUM witnessed QoQ growth of 4% YoY to Rs. 143550 crore, declining 1% YoY. NII declined 4% YoY to Rs. 4296 crore, led by subdued AUM traction and interest reversal of ₹ 450 crore. Elevated provision at Rs. 1351 crore impacted earnings which came at Rs. 1146 crore; down 25% YoY and up 19% QoQ. Headline NPA numbers showed improvement led by standstill, however, proforma GNPA surged to 2.86% with PCR at 65%.

Valuation & Outlook

Pandemic led incremental focus on product mix and business growth in life insurance business provides confidence. Product selection with profitability is seen to propel earnings in general insurance business. While asset quality issues are still not out of woods, Bajaj Finance has emerged stronger with a leaner and focussed operating model. Growth guidance of ~25% for FY22E and opportunity to apply for banking licence have resulted in renewed interest of investors in the stock. This has led to expansion of valuation multiples. Factoring in long term business potential and returning of premium multiple for lending business (contributing 85% to SoTP target), we maintain our target at Rs. 10500 per share based on SOTP valuation, implying a multiple of ~22x on FY23E consolidated earnings. Hence, we maintain BUY.

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Shares of BAJAJ FINSERV LTD. was last trading in BSE at Rs.9070 as compared to the previous close of Rs. 9048.5. The total number of shares traded during the day was 28209 in over 4397 trades.

The stock hit an intraday high of Rs. 9212.2 and intraday low of 8967.1. The net turnover during the day was Rs. 256281959.

Source: Equity Bulls

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