JMFL
Bajaj Finance (Buy)
CMP: ₹3,301.2
Target: ₹3,600
Bucking the broader sector headwinds, Bajaj Finance (BAF) reported PAT of ₹1,180 crore, up 57 per cent y-o-y driven by its unparalleled customer acquisition prowess. During the quarter, the company added 2 million new customers, up 36 per cent y-o-y, with a 54 per cent y-o-y increase in new loans booked to 5.83 million. AUM growth continued to be spectacular at 41 per cent y-o-y driven by all the segments. Margins expanded by 73 bps y-o-y to 12 per cent in Q4 aided by pricing power.
Asset quality trends (ex-IL&FS) were stable q-o-q with GS3 ratio at 1.34 per cent in Q4 while coverage ratio remained comfortable at 65 per cent versus 66 per cent in Q3. Including IL&FS, the GS3 ratio was stable q-o-q at 1.54 per cent with coverage at 60 per cent. BAF remains well positioned to deliver earnings CAGR of 36 per cent over FY19-21E driven by a) strong customer acquisition engine; b) expanding rural footprint with a diversified product offering; c) scale-up of the housing finance subsidiary (targeting an 8-9 per cent market share from the current 1.5 per cent); d) robust fee income generation; and e) superior asset quality. With current leverage of 6.3x, we expect BAF to raise equity capital over the next 12 months (a 5 per cent dilution at CMP will be BV accretive by 32 per cent).
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.