Bajaj Finance - Q2FY21 results - First Take - YES SECURITIES

Mr. Rajiv Mehta, Lead Analyst - Institutional Equities at YES SECURITIES

'operationally better-than-expected'

Result Highlights:

- Core PPOP beat of 7% on our estimates, solely driven by restrained opex - Absolute cost being flat qoq displays modularity of the business

- While fee/comm. expense grew 50% qoq on higher disbursements, cost saving was achieved in employee and other opex (both down 5-10% qoq)

- NII was 2% lower than expectation and represented modest 4% yoy growth - understandably so, due to sharp deceleration in AUM growth and built-up of surplus liquidity (at 16-17% of BS) - also there was Rs1.4bn reversal of the capitalized interest (Rs2.2bn in Q1) - NII growth would have been 8% yoy after adding this

- Consol. AUM growth was 1% yoy, dragged by substantial decline in the short-cycle consumer finance portfolios - Mortgage book grew by 14% yoy and SME loans were flat yoy

- Provisioning was higher than expected at Rs17bn (estimate Rs15bn), but in line with full-year guidance of Rs64-66bn - In Q2, further covid contingency provisions of Rs13.7bn were created on Stage 1 & 2 assets (cover increased to 3.7%)

- Gross NPA and Net NPA as of 30 September 2020 stood at 1.03% and 0.37% respectively and PCR was 64% - If the Company had classified borrower accounts as NPA after 31 August 2020, the Gross NPA and Net NPA ratio would have been 1.34% and 0.56% respectively.

- 5% profit miss mainly came from higher provisioning, while operating performance was stronger than estimated

Operational results being better than expectations and credit cost moving in-line imply that earnings estimates may remain unchanged or marginal revised higher. We retain positive stance and believe that Management commentary on growth rebound would be most critical for incremental valuation re-rating.

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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