Prabhudas Lilladher has given Buy recommendation for Bajaj Finance with a target price of Rs. 8953 in its research report issued on Oct 21, 2022
Prabhudas Lilladher’s research report on Bajaj Finance
BAF’s Q2FY23 earnings were in line with our estimates (PAT at Rs27.8bn vs PLe: Rs28.7bn), led by robust NII traction due to strong AUM growth. Strong business momentum continued (loans grew 31% YoY/7% QoQ to Rs2183bn), funding costs CoF marginally increased to 6.91% in Q1FY23 vs 6.64% in Q1FY23 with improvement in asset quality (Gross NPA down to 1.17% from 1.25% in Q1FY23.NIM improved to 13.25% in Q1’23 vs 13.23% in Q1’23 as yields on advances improved to 18.9% in Q2’23 from 18.5% in Q1’23 mainly due to good QoQ AUM growth of 8% in consumer and SME lending. Company has stated that they are on track to go fully digital across all products and services on web by March 2023. Given deep investments required to create Omni channel strategy (geo-expansion, app platform, web platform), BAF expects Opex-to-NII remain in the range of 35% – 36% in FY23 down from the earlier guidance of 36%-37%. Incorporating higher cost of funds into our estimates, our FY24 EPS stand marginally lower by 0.3% as company should be able to navigate rising cost of funds by passing on rate hikes to borrowers.
Outlook
Being valued as a profitable fintech lender, we value BAF at multiple of 8.4x Sep’24E ABV with TP maintained at Rs 8,953. Maintain BUY.