Bajaj Finance - Q2FY21 - Result Update - YES Securities

Bajaj Finance (Q2FY21) - ADD (Target Rs3,600, Upside 11.3%)

Take comfort in management's credit cost guidance despite the spike in Stage-2 assets

Our earnings estimates for FY21/22 remain largely unchanged as the impact of calibration in AUM growth gets neutralized by lower cost growth and provisioning estimates (particularly for FY22). While the disclosure on Stage-2 assets (8% of AUM v/s usual 2-3%) could look perturbing, BAF has already built a strong provisioning cover of 32% on it. Additionally, management has retained its full-year absolute credit cost guidance implying that flow forward post moratorium and resolution experience are in-line with company's expectations. BAF's earnings performance in ensuing quarters is likely to be strong as growth momentum accelerates and charge-off rate declines. With growth and credit cost tracking back to long-term trajectory in FY22, we estimate BAF to deliver 4.3-4.5% RoA. Stock trades at 22x P/E and 4.5x P/ABV on FY22 estimates. With worst behind, valuation is expected to re-rate as confidence on growth comes back.
YES Securities - Bajaj Finance (Q2FY21) - 20201022

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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