Buy Bajaj Finance; target of Rs 2330: Motilal Oswal

Motilal Oswal's research report on Bajaj Finance

Bajaj Finance’s (BAF) 3QFY18 PAT increased 38% YoY to INR7.66b (3% miss), driven by 35% YoY AUM growth, modest margin uptick (due to higher capital), and stable asset quality. Adjusted for benefit of capital infusion, NII grew largely in-line with AUM growth.SME (31% of AUM) remains a drag to overall growth with AUM growth of 2% QoQ and 16% YoY. Management continues to have cautious outlook on LAP business. Consumer (+39% YoY), Commercial (+52% YoY) and rural (+114% YoY) traction remains strong with growth across product lines (ex 2W and 3W business).

Outlook

Its focus on the SME and commercial lending segments may depress margins and RoE, but will keep growth strong. We tweak estimates by 3/5% FY19E/20E to accommodate slightly lower AUM growth. Buy. For all recommendations report, click here

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