Anand Rathi initiates coverage on the stock with a buy rating and a 12-month target price of Rs 3,370 which translates into an upside of another 20 percent from Thursday’s closing of Rs 2808.
Bajaj Finance is one of the largest players in the rapidly growing consumer finance segment in India and provides interest-free EMI finance options in more than 50 categories.
Anand Rathi initiates coverage on the stock with a buy rating and a 12-month target price of Rs 3,370 which translates into an upside of another 20 percent from Thursday’s closing of Rs 2,808.
The stock rallied from Rs 1,726.25 on March 15, 2018, to Rs 2,808 on March 14, 2019, which translates into a rally of over 60 percent in last 1 year.
Bajaj Finance has a well-diversified credit portfolio. The company focuses on cross-selling, customer acquisition, systematic expansion in delivery channels (both physical and virtual) and distribution of products through these channels are likely to sustain robust growth in AUM, going forward.
Apart from consumer finance, the company also has substantial business penetration in SME, commercial and rural lending. With housing subsidiary, mortgages are also gaining traction.
The company offers wide range of products such as consumer durable loans, digital product loans, lifestyle product loans, 2-wheeler & 3-wheeler loans, salaried personal loans, e-commerce consumer finance, working capital loans, loan to professionals, commercial loans, gold loans, home loans, etc.
The company is growing its customer cross-sell franchise by 25-30 percent every year, said the AnandRathi note.
Bajaj Finance has a leadership position in sector, lower ticket size, consumer durable financing, and lifestyle product financing business along with the diversified nature of its loan portfolio.
“This has allowed the company to register strong AUM growth of over 40 percent CAGR in the past four years at Rs 80,444 crore as on FY18 with asset quality staying under control (GNPA ratio at 1.5%). The net profit in FY11-18 rose at a robust pace of 40 percent CAGR to Rs 2,646 crore as on FY18,” the report added.
In its latest quarterly results, Bajaj Finance reported 54 percent growth in net profit to Rs 1,059 crore led by 41 percent loan growth and net interest margin (NIM) expansion (~50bps to ~12.1%YoY).The asset quality remains under control with GNPAs and NNPAs at 1.55 percent and 0.62 percent, respectively. Loan growth was largely led by consumer finance segment growing 42 percent on a YoY basis, and 13 percent on a QoQ basis to Rs 43,826 crore.