Bajaj Finance - Q1FY21 Result Update - ICICI Securities

The consolidated moratorium book has reduced to Rs. 21,705 crore (or 15.7% of AUM) from Rs. 38,599 crore (or 27% of AUM) as of April 30, 2020 owing to reduction in bounce rate (declining 3-4% monthly) coupled with better collection efficiency. Moratorium in auto finance segment stayed high at 50% from 70% in April. It decided to convert some of its existing customers with no overdue and good repayment track record from term loan to a flexi loan (old product) for a switch fee. It also has an added feature of only interest servicing for the first one to two years apart from digital repayment options. In Q1FY21, the company converted ~Rs. 8,600 crore of term loans into flexi loans.

Valuation & Outlook

Asset quality stress is leading to higher credit cost and dip in earnings. Given anticipation of further increase in credit cost and slower business growth (11% for FY21E), we expect earnings to decline by ~8% YoY for FY21E. Led by lower moratorium stock has already rallied 70% from lows. At 5.2x FY22E ABV, RoE moderating to ~15% and RoA under 3%, the stock looks fairly priced. Lower growth & higher uncertainty warrants being cautious in the near term. Therefore, we continue to maintain HOLD rating and revise our target price to Rs. 3050, valuing the stock at ~4.7x FY22E ABV.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_BajajFinance_Q1FY21.pdf

Shares of Bajaj Finance Limited was last trading in BSE at Rs.3252.55 as compared to the previous close of Rs. 3292.9. The total number of shares traded during the day was 866149 in over 73119 trades.

The stock hit an intraday high of Rs. 3345 and intraday low of 3194.15. The net turnover during the day was Rs. 2827830906.

Source : Equity Bulls

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