Sharekhan's research report on Bajaj Finance
Bajaj Finance Ltd (BFL) reported mixed Q1FY20 numbers, with tepid business growth, but asset quality improved sequentially, and the moratorium share fell to 15.7% of AUM from 27% which is a positive. Adopting a conservative and prudent provision policy, creating additional reserves will help the bank meet challenges on asset quality going forward. Hence, an additional Rs. 1,450 crore COVID-19 provisions (total COVID19 provisions stands at 1.7% of AUM as of June 2020) provides comfort. For Operating performance was strong with PPOP growth of 26% y-o-y aided by cost control, causing cost-to-income (C/I) ratio to fall to 28%. Asset quality improved sequentially with gross NPA and net NPA at 1.40% and 0.50% respectively, from 1.61% and 0.65% in Q4FY20. With a strong balance sheet, robust risk management and prudent management, BFL is a strong franchise for the long term and is well-placed to ride over medium term challenges.
We maintain a Buy rating on Bajaj Finance with a revised price target of Rs. 3,800.
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