ICICI Direct is bullish on Bajaj Finance has recommended buy rating on the stock with a target price of Rs 3700 in its research report dated May 17, 2019.
ICICI Direct's research report on Bajaj Finance
Bajaj Finance continued its all-round strong performance with loan and earnings growth momentum remaining unabated. Consolidated AUM including housing saw growth of 41% YoY to Rs 115888 crore in line with our estimate. It was largely led by SME and consumer segment. SME grew 38% YoY to Rs15759 crore and consumer by 45% YoY to Rs 44989 crore. Rural segment, on a small base, surged 69% YoY while housing subsidiary credit increased 43% QoQ to Rs 17030 crore. Standalone AUM mix of consumer: rural: SME: commercial: mortgage (residual) was at 45%: 9%: 16%: 12%: 18%, respectively, as of March 31, 2019.
A strong performance in a volatile economic scenario (healthy return ratios - RoA at >3.5%, RoE at ~20%, GNPA at <2%) has resulted in investor interest continuing even at higher P/ABV and P/E multiples. Strong business momentum is seen at 33% CAGR in both AUM & PAT in FY19-21E to Rs 199903 crore and Rs 7113 crore. BFL’s improving cost to income ratio in Ind-As is 35% in FY19E. Adequate liquidity & limited exposure to IL&FS depict book quality, digitisation benefits and management strength. We revise our TP to Rs 3700 (Rs 3200 earlier), valuing at ~30x FY21E EPS (6x FY21E ABV). We maintain BUY.
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