MOSL: BAJAJ FINANCE (Buy)-Growth outlook remains healthy-Pressure on LAP continues
Bajaj Finance: Growth outlook remains healthy; Pressure on LAP continues
(BAF IN, Mkt Cap USD15.3b, CMP INR1629, TP INR2330, 43% Upside, Buy)
- Bajaj Finance’s (BAF) 3QFY18 PAT increased 38% YoY to INR7.66b (3% miss), driven by 35% YoY AUM growth, modest margin uptick (due to higher capital), and stable asset quality. Adjusted for benefit of capital infusion, NII grew largely in-line with AUM growth.
- SME (31% of AUM) remains a drag to overall growth with AUM growth of 2% QoQ and 16% YoY. Management continues to have cautious outlook on LAP business. Consumer (+39% YoY), Commercial (+52% YoY) and rural (+114% YoY) traction remains strong with growth across product lines (ex 2W and 3W business).
- From a customer base of 25m currently, management targets to reach 75m over the next five years. BAF already has a database of 30m people who are mass affluent but not yet customers of the company – management would like to tap around half of them. Tie up with RBL is showing strong traction and it has already issued 0.25m cards and target to end with 1m cards by end of CY18.
- Management has infused INR12b in the HFC subsidiary, taking its net-worth to INR15.5b. Over the next 5 years, this could be an INR600-700b balance sheet, as per management. All mortgage businesses will be booked in this subsidiary.
Bajaj Finance Limited is a non-banking finance company (NBFC). The Company is engaged in lending and allied activities. It focuses on consumer lending, small and medium-sized enterprises (SME) lending, commercial lending, rural lending, fixed deposits and value-added services. Its consumer lending products include two-wheelers and three-wheelers finance, consumer durables finance, digital products finance, retailer finance, salaried personal loans, e-commerce consumer finance, e-commerce seller finance and home loan. Its SME lending products include loan against property and business loans. Its commercial lending products include loan against securities and financial institutions group lending business. Its rural lending products include personal loans cross-sell, salaried personal loans and gold loans. It offers retail fixed deposits and wholesale fixed deposits. It is engaged in life insurance distribution, general insurance distribution and mutual fund distribution.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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