27 October 2016
2QFY17 Results Update | Sector:
Equity Shares (m)
M.Cap.(INR b)/(USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, (INR m)
Free float (%)
Financials & Valuations (INR b)
EPS Gr. (%)
RoA onAUM (%)
Div. Yield (%)
TP: INR1,281 (+16%)
Bajaj Finance’s (BAF) 2QFY17 PAT increased 46% YoY to INR4.1b (4%
miss). Strong AUM growth (+38% YoY), improvement in margins (+19bp
YoY) and stable asset quality were the key highlights of the quarter.
AUM continued its robust growth trajectory (+38% YoY, +5.5% QoQ) to
cross the INR523b mark, driven by all segments, barring LAP. Over past
few quarters, the company has turned cautious on DSA-sourced LAP and
started to source more business in-house. This segment will witness pick-
up in growth from next quarter as the base effect plays out.
Personal cross-sell loans grew robustly by 61% to almost reach INR50b.
This is the third consecutive quarter of 50%+ AUM growth in this
segment. Other major growth drivers in the quarter were SME loans
(+55% YoY) and LAS (+82% YoY). AUM mix was largely stable QoQ.
Management has turned slightly cautious on consumer durable finance,
and has made a tactical decision to pull back 15-20% during the festive
season. Depending on the portfolio performance over next few months,
management will reconsider its strategy again. We view this as a prudent
and proactive decision as it would help negate any asset quality concerns
(on CD portfolio) in ensuring quarters. Moreover, we do not see this
move impacting growth significantly, given that the company is a
diversified lender and has other growth engines.
Asset quality remained healthy with GNPLs at 1.58% v/s 1.47% in 1QFY17
and 1.67% (150dpd) in 2QFY16.
Valuation and view:
BAF continues to reap the benefits of healthy
consumer demand and is a dominant player in the consumer durable
financing segment. It continues to increase its market share in consumer
as well as other businesses. While yields would remain under pressure
due to a lower share of CD financing, the company continues to diversify
its liability mix – bank borrowings account for 38% of total borrowings
compared to 45% in the prior quarter. The stock is trading at 6.6x/5.4x
FY17/18E BV. We value the stock at INR1,281 based on RI model,
implying PBV of 5.5x Sep 2018E. Maintain
(Sunesh.Khanna@MotilalOswal.com); +91 22 3982 5521
(Piran.Engineer@MotilalOswal.com); +91 22 3980 4393
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