Sharekhan's research report on Bajaj FinanceBajaj Finance Ltd (BFL) reported a 58.1% growth in net earnings driven by a strong uptick in the net interest income (up 48.3% YoY). Given the seasonally strong quarter and strong uptick in consumer segment (up 43% YoY), the overall assets under management (AUMs) expanded by 40.9% YoY. The mortgages (working on reorganising the business with in-house sourcing) and newer products like rural financing and lifestyle financing delivered a strong growth. The cost of funds moderated while yields expanded (disbursement in better yielding products) that aided growth in margins and core income. BFL continued to deliver a strong growth in AUMs and sturdy asset quality. We believe, given the company’s unique customer acquisition strategy, ability to cross sell, launch of innovative product and strong risk management systems will sustain loan growth momentum. We estimate its earnings CAGR to grow at 28% YoY resulting in superior return ratios (RoA of 3.2% and RoE of 19% by FY2017E). While the stock trades at significant premium to peer companies, we believe strong growth visibility in consumer segments, healthy asset quality and capitalisation levels, the valuation premium will sustain. We have revised our price target on the stock to Rs7,025 (3.7x its FY2018E BV) and maintained our Buy rating on the stock. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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