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BAJFINANCE
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+261.10 (+4.53%)
NSE Volume
24.5L+
Broker Reports
BUY
BUY
REDUCE
BUY
BUY
ACCUMULATE
BUY
HOLD
ACCUMULATE
BUY
BUY
BUY
SELL
BUY
BUY
BUY
BUY
ACCUMULATE
BUY
BUY
SELL
ACCUMULATE
ACCUMULATE
BUY
BUY
ACCUMULATE
BUY
BUY
Q1FY21 earnings beat our estimates across most parameters led by apt business recalibration aiding fees, loans and asset quality and strong operating leverage. While current asset quality masks true picture on delinquencies, asset quality management stands impressive with (a) morat AUMs at 18% (including flexi loans morat) (b) elevated COVID provisioning of Rs24bn covering 11% of moratorium book (c) collection ramp-up (added 2500 staff to 4500 existing collection staff), collections up 8-10% in each Jun- Jul (d)improving bounce rates by 3-4% every month from past 3 months (c) business calibration with stringent LTVs and existing customer focus for sales finance, auto finance, LAS and gold loan businesses and deferred kickstarting of vulnerable bizs, viz; LAP, SME, B2C urban/rural and commercial lending to Jul’21. Benign growth (12%YoY) and higher credit costs guidance (110% increase YoY) for FY21 is less perturbing given healthy PPoP (Q1FY21: 25%YoY/7%YoY:FY21), liquidity buffers (19% of liabilities) and capital sufficiency (Tier I: 23%, total CAR:26%). Against this backdrop, we marginally prune down our growth estimates (12% vs 15% earlier) but maintain elevated NPA/credit costs estimates at 3%+/4% respectively for FY21. Capital and liquidity sufficiency should enable BAF to participate in consumption rebound sooner, hence we envisage robust 24% RoE and 4%RoA; subsequently our EPS estimates stand tweaked by 8-10% over FY21-23. Reiterate BUY as we roll over target multiple to Sep’22 estimates valuing Co. at 4.5x PABV arriving at price target of Rs3,815.
BUY
Given its strong liquidity position, healthy CRAR, strong geographical presence, growing AUM, positive outlook, and strong parentage, we upgrade to BUY rating on the stock with a revised target price of Rs. 2,570 based on 3.5x FY22E BVPS.
BUY
Front-loading of COVID-led provisions of Rs9bn lead to PAT miss to Rs 9.5bn (down 41%QoQ/19%YoY) for BAF. The 81-day quarter witnessed 5%QoQ growth in customer franchise, 1.4%QoQ/27%YoY growth in AUM translating into 3%QoQ/38%YoY increase in NII. Steady NII traction and lower opex (declined 5%QoQ) despite collection infra ramp-up aided healthy operating profit (up 8%QoQ/46%YoY). While inherent unsecured short tenure business stands susceptible to pandemic shocks, incremental asset quality deterioration should not exasperate as: (a) 68% of customers under morat have no bounce history (b) steady bounce rate between critical periods of Apr-May’20 (35-37%) (c)only 2 out of 13 portfolios are either yellow or red, rest green (d)sufficient pre-provision profitability. As BAF model undergoes litmus test with substantial drop in new customer additions, loss of business in discretionary portfolios (viz; lifestyle products, apparels, furniture, cards) and elevated slippages, we slightly trim our growth estimates to 12% vs earlier 15% for FY21. Given capital and liquidity sufficiency acting as natural shock absorbers, FY22 is expected to earnings revival led return uptick (RoEs: 21%/RoAs:3.7%) and AUM traction (24% YoY growth). Reiterate BUY as stock stands in the value zone. Our price target stands at Rs3000 (earlier Rs 3582) as we assign book value multiple of 4.6x FY22E (earlier 5.1x).
NEUTRAL
BUY
Valued at 5.8x its FY2022E BVPS, BFL posted stable performance on headline parameters. The company’s strong franchise, impressive operating metrics and strong return ratios work in its favour. We believe long-term business strengths remain, and management indicated early signs of a demand revival in both rural and semi-urban India, which is positive. We have introduced FY2022E earnings estimates and are accordingly rolling over our PT on FY2022E book value estimates. We maintain our Buy rating with a revised PT of Rs. 5,000.
BUY
With structural story intact, BAF’s demonstration of capabilities on quality asset and customer acquisition backed by benefits from lower tax rates and capital sufficiency (no dilution over next 3years) prompt us to upgrade our EPS estimates over FY20-22E. Resultantly, BAF remains poised to deliver 23.0%ROEs/4.3% RoAs by FY22E. Such a robust performance coming in the tough periods reinforces our confidence in the business further prompting us to upgrade the price target to Rs5,000 (earlier Rs4,668) valuing the Co. at 6.3x PABV Sep’21E. With BAF currently trading at fwd. multiple of mere ~5x, we believe a new innings has begun. REITERATE BUY.
BUY
Valued at 5.8x FY21E BVPS, BFL posted stable performance on headline parameters. However, cautious outlook and the weak demand environment are manifesting challenges. While the strong franchise, impressive operating metrics and strong return ratios work in its favour. Asset quality and growth are key monitorables in the near term. We maintain our Buy rating on the stock with an revised price target (PT) of Rs. 4400.
HOLD
BFL has exhibited a strong performance in a volatile economic scenario (healthy return ratios - RoA at >3.5%, RoE at ~20%, GNPA at <2%). It is delivering best growth (33% CAGR in AUM), highest margins >10%, strong PAT growth >35% CAGR and trading at top notch valuation multiple of 6.7x FY21E ABV. We believe maintaining these high margins and strong growth hold key for future. We maintain our P/BV multiple to 6.5x FY21E BV and target price of Rs 4350. We change our rating on the stock from BUY to HOLD as the stock has already rallied ~20% post the government’s corporate tax cut announcement.
BUY
While lifestyle financing witnessed 30dpd asset deterioration, overall slippages at Rs7.86bn stood under control backed by asset upgrades and sell downs indicative of strongly penetrated collection mechanism. In light of patchy macros and prudency, credit costs guidance has been upped to 175bps for FY20 as against 140bps in FY19. Going forward, higher credit costs should partially be offset with operating leverage benefits and strong business visibility (30% AUM CAGR: FY19-22E) defying market headwinds. Consequently, BAF remains poised to deliver 21.0% ROEs/3.5% RoAs by FY22E. We reiterate BUY rating on the stock valuing Co. at 6.6xPABV Sep’21 estimates arriving at price target of Rs 4,668 (earlier Rs4,681).
HOLD
Overall, BAF remains comfortable on liquidity front maintaining its robust growth trajectory, with deepening geographical penetration and increasing repeat business. Over the past two years, it has also enhanced its capabilities on two fronts – generating higher fee income and improving the deposit franchise. While we remain positive on the stock, on the back of outstretched valuations we assign‘Hold’ rating on the stock with a target price Rs 3591 (6.5x FY21E P/BV & ~30x FY21E P/E).
BUY
We initiate coverage on Bajaj Finance (BAF) with a BUY given formidable franchise in consumer financing, strong growth momentum in rural finance and expected uptick in mortgage business post spin off in step down subsidiary. BAF has emerged strong in the recent NBFC rout given 1) <2% GNPA and 65-70% PCR across cycles, avg. 40% positive ALM gap in short maturity buckets and diversified liability mix. We believe a CAGR of 31% in AUM and stable asset quality will enable 32% PAT CAGR over FY19-21. We expect premium valuations to sustain given ROA and ROE of 3.7%/20.1%, lower ALM risk and strong retail presence in consumer segment. We assign P/ABV multiple of 6.9x FY21E to arrive at price target of Rs 3,860.
ACCUMULATE
Maintain rating and valuation; Trim earnings by 3%/2% in FY20/21E
We have trimmed our earnings estimates by 3%/2% in FY20/21E to factor the higher credit costs. We believe it is likely to remain 30%+ growth company in the near and medium term. We maintain our rating and multiple, valuing it at 6.5x FY21E P/ABV (lower our target price to Rs 3590 from Rs 3700).
We have trimmed our earnings estimates by 3%/2% in FY20/21E to factor the higher credit costs. We believe it is likely to remain 30%+ growth company in the near and medium term. We maintain our rating and multiple, valuing it at 6.5x FY21E P/ABV (lower our target price to Rs 3590 from Rs 3700).
REDUCE
Following up with our last view of unsustainability of high growth, valuations, the stock has already corrected 14% from our REDUCE recommendation. We still believe earnings revision and valuation multiple may contract from here on. Asset quality may see further deterioration. Hence, we increase our provisions estimate for FY20-21E and reduce our PAT estimates lower for FY20-21E by 5-7%. We maintain our P/ABV multiple at 5.2x and P/E multiple to 26x. We maintain REDUCE with a target price of Rs 2900 (earlier | 3300). Continuity of high margins in the current environment along with market share in high yielding-low risk consumer segment remain risks to our call.
BUY
REDUCE
BFL has exhibited a strong performance in a volatile economic scenario (healthy return ratios - RoA at >3.5%, RoE at ~20%, GNPA at <2%). With best of growth (33% CAGR in AUM), highest margins, strong PAT growth (33% CAGR) and top notch valuation multiple (30x on FY21E EPS) already in the price, we expect further upsides to be capped. Since our initiation, the stock has surged ~7x from | 500 to | 3484 (and up 12% post our last update at | 3200). Factoring in the above aspects, we reduce our P/BV multiple to 5.4x (from 6x earlier) and P/E multiple to 28x from 30x. We downgrade the stock from BUY to REDUCE. Continuity of high margins in current environment and market share in high yielding- low risk consumer segment remain risks to our call.
BUY
A strong performance in a volatile economic scenario (healthy return ratios - RoA at >3.5%, RoE at ~20%, GNPA at <2%) has resulted in investor interest continuing even at higher P/ABV and P/E multiples. Strong business momentum is seen at 33% CAGR in both AUM & PAT in FY19-21E to Rs 199903 crore and Rs 7113 crore. BFL’s improving cost to income ratio in Ind-As is 35% in FY19E. Adequate liquidity & limited exposure to IL&FS depict book quality, digitisation benefits and management strength. We revise our TP to Rs 3700 (| 3200 earlier), valuing at ~30x FY21E EPS (6x FY21E ABV). We maintain BUY.
BUY
BAF currently trades at 5.9x its FY2021E book value. When viewed in perceptive of high growth and strong asset quality, we believe these premium valuations are sustainable. We introduce our estimates for FY2021E and rollover the price target (PT). We maintain our Buy rating with a revised PT of Rs. 3,400.
BUY
Despite the liquidity crunch in the NBFCs sector, BAF’s Q3FY19 performance remained steady. The company continues to deliver high growth on the back of geographical expansion (which helps in reducing risk as well), deeper penetration in existing customers and increasing product offering (across fund and fee-based segments). While favorable asset quality indicators provide tailwinds for strong growth in high-yield segments, the company will need to wind down in case the cycle turns otherwise. BAF’s strong third quarter performance despite a volatile liquidity scenario coupled with healthy return ratios and stable asset quality commands premium valuations. We expect strong growth momentum to continue. This coupled with improving C-I ratio, adequate liquidity & limited exposure to IL&FS will support earnings visibility. We have a Buy on the stock valuing the company at 5.8x FY21EABV arriving at target price of Rs 2927.
ACCUMULATE
BUY
A strong performance in a volatile economic scenario (healthy return ratios - RoA at >3.5%, RoE at ~20% GNPA at <2%) leads to investor interest even at higher P/ABV multiple with strong growth momentum at 33%, 34% CAGR in AUM, PAT, respectively, in FY19-21E to | 6653 crore. BFL’s improving cost to income ratio in Ind-As to 38% (FY19E), adequate liquidity & limited exposure to IL&FS depict management strength. We revise our target price to Rs 2900 (Rs 2600 earlier), valuing at ~25x FY21E EPS (5.8x FY21E ABV) for a RoE of ~22% & RoAs of ~3.7%. Retain BUY.
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About
Bajaj Finance Ltd.
NSE: BAJFINANCE | BSE: 500034 | ISIN: INE296A01024 | Sector: Finance
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