Prabhudas Lilladher's research report on Bajaj Finance
While BAF’s Q2FY22 earnings (PAT at Rs14.8bn vs PLe: Rs15.4bn) missed our estimates on account of elevated collections costs and employee hiring, yet stood healthy on several fronts. (1) Marked improvement in auto finance NPAs (21% absolute decline QoQ; GNPA % at 16% vs 19% (Q1FY22)) (2) the write-offs at Rs3.55bn stood lower than Rs9bn (Q1FY22) and Rs 20bn (Q4FY21), Rs23bn (Q3FY21) (3) Higher PCR at 55% vs 51% (Q1FY22) despite improvement in headline GNPA (4) strong core income with NII up 19% YoY.
As BAF stands geared to foray into new credit cycle (26% AUM CAGR over FY22-24) backed by strong BS (liquidity buffers: 9%- 10%/CAR:28%), robust collections framework and digital transformation, we reiterate BUY recommendation on the stock. Premium valuations is here to stay as BAF is now perceived as a profitable fintech lender, so our PBV stands at 9.4x Sep’23E, TP largely unchanged at Rs 9092 (earlier Rs 9,096).