Buy Bajaj Fin; healthy biz momentum continues: Motilal Oswal

Bajaj Finance (BAF) Q1FY16 PAT stood at Rs 276 crore, up 30% y-o-y and 19% q-o-q. Healthy AUM growth…

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Bajaj Finance (BAF) Q1FY16 PAT stood at Rs 276 crore, up 30% y-o-y and 19% q-o-q. Healthy AUM growth (32% y-o-y; 10%q-o-q), stable asset quality trends and strong performance of the consumer business were the key highlights of the quarter.

AUM growth remained robust at Rs 35,560 crore, driven by a healthy 39% y-o-y growth in consumer finance and 26% y-o-y  growth in the SME business; the commercial segment continue to de-grow.

BAF started reporting asset quality on 150dpd basis, in line with RBI requirements, from this quarter. Thus, GNPA/NNPA increased to 1.69%/0.55%.  On a 180 dpd basis, GNPA/NNPA remained stable at 1.54%/0.48%. PCR declined  marginally q-o-q to 68%. GNPA/NNPA on 90 dpd stood at 2%/0.70%.

BAF continues to reap the benefits of healthy consumer demand and is among the few companies doing well in this space. It continues to increase its market share in consumer business—though a higher share of incremental growth could be driven by the low-yield mortgage business, which could pressurise margins. However, strong AUM growth and lower credit cost will mitigate the impact. Maintain buy with a target price of R5,479—3.5x FY17e BV.

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