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Motilal Oswal
Bajaj Finance (Buy)
CMP: ₹1,588.45
Target: ₹1,800
Bajaj Finance’s (BAF) 1QFY18 PAT increased 42 per cent y-o-y to ₹600 crore (4 per cent beat). However, this belies its strong operating performance — PPoP (pre-provision operating profit) grew 46 per cent y-o-y
(6 per cent beat), driven by robust AUM growth of 39 per cent y-o-y, and margins expanded
strongly by 90 bps y-o-y to 12.9 per cent.
AUM continued its robust growth trajectory (+39 per cent y-o-y, +4.4 per cent q-o-q) to reach ₹68,800 billion, led by impressive growth in consumer finance (+43 per cent y-o-y) and commercial business (+68 per cent). Within consumer business, personal cross-sell
loans grew 59 per cent y-o-y to ₹6,960 crore (tenth consecutive quarter of 50 per cent+ AUM growth), while salaried home loans rose 83 per cent y-o-y. The company’s penetration of Bajaj 2Ws remained at 37 per cent.
Valuation and view: Bajaj Finance — a dominant player in the consumer durables
financing segment — continues to reap the benefits of healthy consumer
demand, increasing its market share in consumer and also other businesses.
At the same time, it is proactive in detecting early warning signals with regard
to asset quality.
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