Motilal Oswal's research report on Bajaj Finance
Bajaj Finance (BAF)’s 1QFY23 PAT grew 160% YoY/7% QoQ to ~INR26b (17% beat). The company posted a healthy operational performance driven by robust customer additions, new loan acquisitions and strong velocity aided by its omni-channel strategy and digital ecosystem. NIM (calculated) expanded ~40bp QoQ to 13.2% supported by a ~15bp QoQ decline in the cost of borrowings. We, however, estimate NIM to contract ~40bp YoY in FY23 due to BAF’s limited ability to pass on the increase in borrowing costs against a large fixed-rate loan book and an absence of significant IPO financing (under the new RBI guidelines). GS3/NS3 improved ~35bp/~15bp QoQ to 1.25%/0.5%, respectively. OTR book classified under Stage 2 stood at INR4.74b (~23bp of AUM) and BAF carried provisions of ~INR1.1b (~23%) on this book in 1QFY23.
We model an AUM CAGR of ~26% and PAT CAGR of 35% and expect BAF to deliver an RoA/RoE of 4.4%/22% in FY24E, respectively. We would remain watchful of the various developments on BAF’s payment offerings and potential foray into the credit card business. Reiterate BUY with a TP of INR7,320 (premised on 7x FY24E BVPS).
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