Earnings Update - Bajaj finance (BAF IN) - Continues to be consistent in its core performance - CSEC Research

Continues to be consistent in its core performance

- Bajaj Finance registered a robust growth in its AUM (36%YoY, 4.5%QoQ) to INR 602bn in 4QFY17 led by sound growth in segments such as Consumer (43%YoY), Commercial (52%YoY) & Rural (129%YoY). Consequently, the AUM mix stands at Consumer- 45.1%, SME- 36.7%, Commercial- 13.1% & rural segments - 5.1%.

- Growth in the AUM was majorly led by segments like Personal loan cross sell (60% YoY), Salaried home Loans (93% YoY), Loan against Securities (50%YoY) & 2W & 3W finance (34%YoY) which together accounts for 30% of the AUM. Going forward, management targets ~37% share of consumer finance over the medium to long term from current level of 45%.

- Number of new customers acquired stands at 0.95mn for the quarter taking the overall customer franchise to 20.13mn customers as of 4QFY17.

- Cost of funds continues to remain significantly lower supported by change in borrowing mix as bank borrowings declined from to 34.6% from 37.2% in 3QFY17.

Valuation: BAF has shown consistent earnings growth despite the impact of demonetization, stable asset quality and healthy return ratios; however the stock is trading at a rich valuation of 4.8X P/BV of FY19E. At such steep valuations, the strong growth estimates are already priced in so we maintain our rating on the stock as MARKETPERFORMER with a target price of INR 1375 assigning a P/BV of 4.6x FY19E.

Risks: Deterioration in asset quality given high exposure to Commercial, Consumer & SME segments.

Shares of Bajaj Finance Limited was last trading in BSE at Rs.1291.5 as compared to the previous close of Rs. 1312.45. The total number of shares traded during the day was 88025 in over 3148 trades.

The stock hit an intraday high of Rs. 1334.85 and intraday low of 1268. The net turnover during the day was Rs. 114067386.

Source : Equity Bulls

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