Bajaj Finance - Strong Operational Performance - Nirmal Bang

CMP: Rs 1,383
Target Price: Rs 1,638

Bajaj Finance (BFL) reported net profit of Rs 160 cr (+33.4% YoY) in Q3FY13 driven by growth across consumer and SME business. Management continues with its cautious approach towards infra and construction lending leading to a de growth in the commercial book. The asset quality remained fairly stable during the quarter with gross NPA at 1.0% and net NPA at 0.2%. We like the company's mantra of "Aiding growth instead of creating growth" which has led a sustainable growth in the company's loan book. The company has been able to grow in a scenario where the consumer discretionary was soft, auto-sector performance was flat and consumer durables industry grew 6-8% on an overall basis. However, Management believes that once the economy recovers leading to an improvement in consumer discretionary spending, Bajaj Finance would be in a position to outperform the broader market. Going forward, we believe that Bajaj Finance will continue to show a strong growth trajectory. With control over NPAs, wider access and strong growth in the book, Bajaj Finance will continue to strengthen its position as a retail finance company.

At CMP the stock is trading at 2.09x FY13E and 1.77x FY14E ABV and 10.37x FY13E and 9.64x FY14E EPS. We arrive at a target price of Rs 1,638 (P/ABV multiple of 2.1x) indicating further potential upside of 18% from current levels and recommend to BUY the stock.

Source : Equity Bulls

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