Axis Securities in its latest report post the Bajaj Finance (BAF) results has recommended a "hold" rating on the stocks.
"BAF reported an almost in-line operating performance Q2FY21 performance, albeit higher provisioning (up 186/0.9% YoY/QoQ) and low AUM growth (up 1% YoY) kept PAT flattish QoQ and down 36% YoY to Rs 965 crores. NII was up 8.5/3.3% YoY/QoQ on improved NIMs.
Provisioning remained elevated at Rs 1,700cr (3.7% of AUM). New customer additions were higher sequentially to 12lac; though still lower than the quarterly run-rate of 20-25lac. BAF disbursed 36lac loans in Q2, down 44% YoY. It remained cautious on Retail EMI/Wallet Loans (7/2% of loans) impacting disbursement volumes by 6lac. The consumer B2B book, especially consumer durables finance, continues to see a sharp moderation, down 19% YoY," Axis Securities has stated.
Management believes disbursements would pick up over the next 1-2 months as bureaus get updated with post-morat data. For FY21, AUM growth has been revised to 6-7% from 10-12%. It has restarted origination across all businesses except REMI (452K accounts - 6.9%) and wallet loans (152K accounts - 2.3%) which are on pause mode till January/ March respectively.
"It is working on a business transformation project that will be completed by Jul'21 which should meaningfully reduce opex - CI ratio to sub-30% post implementation.
As the festive season begins, we expect disbursements to improve month on month. Company's calibrated approach towards growth along with cost control measures and stable NIMs will support performance on gradual opening up of the economy. We maintain Hold with a target price of Rs 3297 (4.6x FY22E ABV)," Axis Securities has stated.