Buy Bajaj Finance; target of Rs 8600: KR Choksey

KR Choksey's research report on Bajaj Finance

Net Interest Income (NII) for Q3FY24 increased by 29.2% YoY (+6.4% QoQ) to INR 76,553 Mn. For 9MFY24, NII grew by 28.9% to INR 215,708 Mn, led by strong business momentum. Pre-Provision Operating Profit (PPOP) stood at INR 61,422 Mn, a growth of 26.6% YoY (+5.3% QoQ) in Q3FY24. PPOP was 1.3% below our estimates. PPOP for 9MFY24 stood at INR 175,206 Mn, an increase of 28.9% YoY. Profit after tax for Q3FY24 increased by 22.4% YoY (+2.5% QoQ) to INR 36,390 Mn from INR 29,730 Mn in Q3FY23, despite higher provisions. Net profit was 3.5% below our estimates because of higher-than-expected provisions during the quarter. For 9MFY24, net profit grew by 27.3% YoY to INR 106,266 Mn. The capital adequacy ratio (including Tier-II capital) as of December 31, 2023, was 23.9%. Tier-I capital was 22.8%.

Outlook

We assign a P/ABV multiple of 4.8x on FY26E adj. book value of INR 1,792.4 (earlier 6.2x FY25E ABV to arrive at a T.P. of INR 8,600 per share (earlier INR 9,475), an upside of 25.3% over CMP. Accordingly, we maintain our “BUY” rating on BAF shares.

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