22 July 2015
1QFY16 Results Update | Sector:
Financials
Bajaj Finance
BSE SENSEX
28,505
Bloomberg
Equity Shares (m)
M.Cap. (INR b)/(USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val (INRm)/Vol ‘000
Free float (%)
S&P CNX
8,634
BAF IN
53.3
273.5/4.3
5,652/2,151
-5/31/119
163/42
42.4
CMP: INR5,133
TP: INR5,479 (+7%)
Buy
Financials & Valuation (INR Billion)
Y/E March
NII
PPP
PAT
EPS (INR)
EPS Gr. (%)
BV/Sh (INR)
RoA on AUM
(%)
RoE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
Div. Yield (%)
28.6
5.3
0.4
24.0
3.8
0.6
19.2
3.3
0.7
2015 2016E 2017E
28.7 37.2 47.1
17.4
9.0
24.2
3.1
20.4
10.1
23.4
11.4
19.0
3.0
19.1
14.0
29.8
14.2
24.8
2.9
18.3
14.0
179.6 213.8 266.8
960 1,342 1,566
5% PAT beat; healthy business momentum continues; asset quality remains stable
n
Bajaj Finance (BAF) 1QFY16 PAT stood at INR2.76b, up 30% YoY and 19% QoQ
(5% est. beat). Healthy AUM growth (32% YoY; 10% QoQ), stable asset quality
trends and strong performance of the consumer business were the key highlights
of the quarter.
n
AUM growth remained robust (up 32% YoY, 10% QoQ) at INR355.6b, driven by a
healthy 39% YoY growth in consumer finance and 26% YoY growth in the SME
business; the commercial segment continue to de-grow.
n
BAF started reporting asset quality on 150dpd basis, in line with RBI
requirements, from this quarter. Thus, GNPA/NNPA increased to 1.69%/0.55%.
On a 180dpd basis, GNPA/NNPA remained stable at 1.54%/0.48%. PCR declined
marginally QoQ to 68%. GNPA/NNPA on 90dpd stood at 2%/0.70%.
n
Other highlights:
1) BAF now ranks among the largest new client acquirers in
India, with 1.7m customer acquisitions in 1Q (1.2m in 1QFY15); 2) forayed into e-
commerce seller finance space via tie-up with Flipkart; 3) disbursed INR3b in
rural lending during the quarter and entered Karnataka; 4) conscious decision to
slow down the LAP business (LAP grew 13% v/s AUM growth of 32%) to realign
the business model in the wake of intense competition.
n
Valuation and view:
BAF continues to reap the benefits of healthy consumer
demand and is among the few companies doing well in this space. It continues
to increase its market share in consumer business—though a higher share of
incremental growth could be driven by the low-yield mortgage business, which
could pressurize margins. However, strong AUM growth and lower credit cost
will mitigate the impact. Maintain
Buy
with a TP of INR5,479—3.5x FY17E BV.
Sunesh Khanna
(Sunesh.Khanna@MotilalOswal.com); +91 22 3982 5521
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
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