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YES Securities
Bajaj Finance (Buy)
Target: ₹3,600
CMP: ₹3,305
Core PPOP beat of 7 per cent on our estimates, solely driven by restrained opex. Absolute cost being flat q-o-q displays modularity of the business. While fee/comm. expense grew 50 per cent q-o-q on higher disbursements, cost saving was achieved in employee and other opex (both down 510 per cent q-o-q).
NII was 2 per cent lower than expectation and represented modest 4 per cent y-o-y growth; understandably so, due to sharp deceleration in AUM growth and built-up of surplus liquidity (at 16-17 per cent of BS). Also, there was ₹140 crore reversal of the capitalised interest (₹220 crore in Q1). NII growth would have been 8 per cent after adding this.
Provisioning was higher than expected at ₹1,700 crore (estimate ₹1,500 crore), but in line with full year guidance of ₹6,400-6,600 crore. In Q2 FY21, further covid contingency provisions of ₹1,370 crore were created on stage 1 & 2 assets (cover increased to 3.7 per cent).
Gross NPA and net NPA as of September 2020 stood at 1.03 per cent and 0.37 per cent respectively and PCR was 64 per cent. If the company had classified borrower accounts as NPA after August 31, the gross and net NPA ratio would have been 1.34 per cent and 0.56 per cent respectively.
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