Accumulate Bajaj Finance; target of Rs 2900: Dolat Capital

Dolat Capital's research report on Bajaj Finance

BAF reported a strong quarter, with a PAT growth of 54% YoY, supported by a robust 41% growth in AUM and cost efficiency, despite higher credit cost. Credit costs rose, on account of higher provisions in the IL&FS account and seasoning of its loan books. There was implied by a higher provision in stage 1 and 2 assets. In addition, GNPA increased 1.55% higher by 6 bps QoQ, of which IL&FS were contributed 21 bps. With a business model, well tested that remained unfettered in the crisis, we expect it remain this strong with improved RoAs through scale benefits and pricing power.

Outlook

We expect healthy RoA expansion by 20 bps benefitted by cost efficiency, pricing power, a strong franchise and higher opportunities to scale. We roll over our estimates and maintain Accumulate at 5.3x FY21E P/ABV.