Accumulate Bajaj Finance; target of Rs 8488: KR Choksey

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KR Choksey's research report on Bajaj Finance

Assets under management (AUM) grew by 22% to INR 166,937 Cr as of 30 September 2021 from INR 137,090 Cr as of 30 September 2020. Core AUM growth in Q2FY22 was approximately INR 11,150 Cr. Net Interest Income (NII) for Q2FY22 increased by 28% to INR 5,335 Cr as against INR 4,162 Cr in Q2FY21. Interest income reversal for the quarter was INR 322 Cr as compared to INR 216 Cr in Q2FY21. Loan losses and provisions for Q2FY22 was INR 1,300 Cr as against INR 1,700 Cr in Q2FY21. Profit after tax for Q2FY22 increased by 53% to INR 1,481 Cr from INR 965 Cr in Q2FY21. Gross NPA and Net NPA as of 30 September 2021 stood at 2.45% and 1.10% respectively, as against 2.96% and 1.46% as of 30 June 2021. The Company has provisioning coverage ratio of 55% on stage 3 assets and 155 bps on stage 1 and 2 assets as of 30 September 2021. Capital adequacy ratio (including Tier-II capital) as of 30 September 2021 was 27.68%. The Tier-I capital was 24.90%.

Outlook

The stock is currently trading at 11.1x/9.1x/7.3x P/ABV of its FY22E/FY23E/FY24E adj. book value respectively. Since our last update, the stock has rallied 4.3%. We assign a P/AVB multiple of 8.3x on FY24E adj. book value to arrive at a Target Price of INR 8,488 per share (previously INR 7,170 per share), an upside of 13.5% over CMP. Accordingly, we upgrade our rating to “ACCUMULATE” (earlier HOLD) on BAF shares.

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