Accumulate Bajaj Finance; target of Rs 6027:Emkay

Emkay research report on Bajaj FinanceBajaj Finance (BAF) delivered stellar performance in Q2FY16 driven by 1) robust 36% yoy growth in AUMs led by a 29% yoy increase in new customer acquisitions, 2) ~70bp yoy expansion in NIMs and 3) stable asset quality with improved provision coverage ratio AUM growth was fairly granular with the consumer and SME segments growing by 42% yoy and 29% yoy respectively; Commercial and rural segments too grew at a faster pace, albeit on a small base Asset quality was stable qoq with GNPLs at 1.7% (on a 150-dpd NPL recognition basis); Note, provision coverage ratio improved to 73% from 68% in Q1 as the management made an accelerated provision of Rs310m leading to a 9bp qoq fall in net NPLs The management remains confident of maintaining a 25-30% AUM growth in the near to medium term; Falling interest rates and recent equity infusion is margin accretive BAF has been an outlier among NBFCs, which has maintained strong growth along with healthy profitability and asset quality, despite challenging environment. We expect this trend to continue and believe qualitative growth justifies premium valuations. The stock trades at 3.2x FY17E BV and 19.6x FY17E EPS. Maintain Accumulate.

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