Accumulate Bajaj Finance; target of Rs 1030: KR Choksey

While the Government’s demonetization drive has impacted the financial space; albeit transient, the dominant consumer durable finance player Bajaj Finance Ltd (BAF) has witnessed its own set of confrontations. But the structurally RoE focused model with clear earnings and growth visibility has got the long term story intact.

The transitory demonetization impact (particularly impact witnessing in CD, LAP, small business loans) and steep valuations should call for near term volatility in stock momentum and hence we slightly prune our valuation multiple to 5.0x P/ABV FY18E arriving at a price target of INR 1030 (earlier INR 1202). The structurally RoE focused model (20-21% sustainable RoEs to be maintained; RoAs 3%) coupled with clear business and earnings momentum visibility deserve a premium multiple. Factoring in the short term downside risks, we maintain ACCUMULATE recommendation on the stock with long term upwards bias.