Hold Bajaj Finance; target of Rs 2000: ICICI Direct

ICICI Direct's research report on Bajaj Finance

Covid-19 posed risk led provisions to rise to Rs 1953 crore vs. Rs 831 crore QoQ. Around Rs 1490 crore one time provision comprised 1) Rs 129 crore of additional provision from recalibration of ECL model in Q4, 2) Rs 900 crore of contingency provision for Covid-19 based on moratorium, bounce behaviour of customers in April, May and expected worsening in macro environment, 3) Rs 390 crore charge off for two large identified stressed accounts. As of April 30, 2020, 27% of consolidated AUM was under moratorium. Of customers under moratorium, 68% have no recent bounce history but overall bounce rates are high currently that needs to be watched.

Outlook

Therefore, we continue to maintain HOLD rating and maintain our target price lower at Rs 2000, valuing the stock at ~3x FY22E ABV. Risks to our call remains faster opening up of the country from lockdown and pickup in economic activity.