YES Securities' research report on Bajaj Finance
BAF delivered an in-line performance at earnings level despite a marginal miss on NII with a lower-than-expected portfolio yield. Credit metrics and collection efficiencies across products improved further in Q4 FY22 and were better than pre-Covid levels. Notwithstanding slippage of a large B2B commercial account worth Rs3.9bn, overall Stage-3 assets were flat at Rs31bn (GNPL lower at 1.6% v/s 1.73% in Q3). Stage-2 assets declined significantly by 27% qoq in abs terms (within this OTR pool more than halved) and stood at 2% of loan assets. Credit cost was at annualized 1.5% despite an additional charge of Rs1bn for the above-mentioned commercial account. Provisions on OTR/non-OTR Stage-2 assets stood at healthy 20%/30% respectively. ECL cover on Stage-3 assets was raised to 58%.
We see 25%+ AUM growth and 35%+ earnings growth (normalization of credit cost) over FY22-24. BAF offers a much superior growth and profitability metrics within our financials coverage universe. Stock currently trades at 7x FY24 P/ABV and we maintain BUY.