Bajaj Finance Ltd. (BFL) | Q3FY15 Result Update | Strong show continues on all fronts… maintain HOLD with upwards revised target price of Rs 3,418... :: IndiaNivesh

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Strong show continues on all fronts… maintain HOLD with
upwards revised target price of Rs 3,418...
Rs.mn Q3FY15 Q2FY15 Q3FY14 Q‐o‐Q % Y‐o‐Y % INSPL Q3FY15E Variance(%)
Net Interest Income 8,240 6,258 6,178 31.7 33.4 7,464 10.4
Pre Provision Profit 5,009 3,788 3,743 32.3 33.8 4,758 5.3
Net Profit 2,584 1,972 1,941 31.1 33.1 2,444 5.7
Source: IndiaNivesh Research
Bajaj Finance reported better than expected results as Net Interest income was
ahead of expectation by 10% at Rs 8.2 bn led by strong AUM growth of 37% yoy (vs
our exp of 32% yoy). NIMs (calc) surprised positively and improvement of 210 bps
qoq was higher than expectation of 126 bps qoq. Operating Profit / Net profit also
remains ahead of expectation by 5-6% each to Rs 5.0 / 2.6 bn. Asset quality remains
strong at Gross / Net NPA of 1.5% / 0.5% respectively. On back of beat on all fronts,
we are increasing earnings estimate by 4% / 6% for FY15E / FY16E and introducing
FY17E earnings estimates. Valuations at P/ABV of 3.3x and 2.8x for FY16E and
FY17E respectively leave no scope for further upside. Hence maintain hold with
upward revised target price of Rs 3418, rolling over multiple to 2.5x for FY17E ABV.
Result update
AUM growth remains strong:
AUM growth of BFL was strong at 37% to Rs 308.2 bn led by strong growth in
Consumer (up 32% yoy) and SME business (up 46% yoy) on back of festive season.
AUM in Commercial business continues to de grow by 7% yoy due to conscious
decision of not growing in this segment. Further BLF’s penetration (market share)
in Bajaj Auto’s two wheeler sales has increased to 37% due to increased financing
during festive season. In Consumer durables, BFL has done disbursement to 1.12
mn accounts which is up 61% on yoy.
(Rs mn) % of total Q3FY15 Q3FY14 % YoY Q2FY15 % QoQ
Asset under management 100.0 308220 224610 37.2 280040 10.1
AUM ‐ Consumer 38.2 117850 89250 32.0 110690 6.5
AUM ‐ SME business 55.3 170510 116500 46.4 149950 13.7
AUM ‐ Commercial 5.7 17510 18860 ‐7.2 18060 ‐3.0
AUM ‐ Rural 0.8 2350 300 683.3 1340 75.4
Source: Company, IndiaNivesh Research
Margins surprised positively:
NIMs (Calc) of BFL increased by 210 bps qoq to 11.2% as against expectation of
126 bps qoq expansion in margins. Yield on funds (calc) have moved up
significantly by 222 bps qoq to 19.3% in Q3FY15. Net Interest income was ahead of
expectation at Rs 8.2 bn (vs our exp of Rs 7.5 bn), up 33% yoy. 47% of the total
borrowings now constitute bank borrowing (as against 53% earlier), 50.3% is from
CPs / NCDs / Tier II Bonds and remaining 2.6% is retail fixed deposits. Borrowing
cost at wholesale level for BFL has started to come down marginally

LINK
http://www.indianivesh.in/Admin/Upload/635572712405916250_Bajaj%20Finance_Q3FY15%20Result%20Update.pdf