Buy Bajaj Finance; target of Rs 6880: Motilal Oswal

Motilal Oswal's research report on Bajaj Finance

BAF's 3QFY23 PAT grew 40% YoY to ~INR29.7b (in line). This healthy performance was driven by a) strong velocity in customer additions/ new loan acquisitions, b) the ability to maintain stable margins, and c) a slight moderation in opex ratios, aided by operating leverage. In 9MFY23, PAT grew ~82% YoY to ~INR83.5b (INR46b in 9MFY22). - NII grew 25% YoY to INR59.2b. Other operating income grew 19% YoY, driven by a healthy improvement in fee income. Adjusted net total income (NTI) grew 28% YoY (after adjusting NII of ~INR2b earned on IPO financing in 3QFY22). - 3QFY23 NIM (calc.) was stable QoQ at ~13.2%. We expect NIM to compress by ~35bp in FY24, driven by BAF's higher cost of borrowing and pressure on yields in a highly competitive landscape. - We estimate an AUM/PAT CAGR of ~26%/23% over FY23-FY25 and expect BAF to deliver a RoA/RoE of 4.6%/24% in FY25. Management categorically stated that it has no plans/aspirations now to convert into a bank and that there are no discussions about any management change.

Outlook

However, we remain watchful of developments in BAF's payment offerings and its foray into new product lines like MFI, Auto, CV and Tractors. Maintain Buy with a TP of INR6,880 (premised on 5.7x Sep'24E BVPS).

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Bajaj Finance - 30 -01-2023 - moti