Bajaj Finance posted another strong quarter, with PAT growing at 43% YoY on an AUM growth of 41%, (38% YoY excluding IPO financing). The negatives were a 6 bps increase in GNPA and caution on 2W/3W and digital products. The two account for 11% of the book. Except the mortgage portfolio, all portfolios witnessed a deterioration in asset quality. The GNPA rose 61% YoY, faster than the book growth. We have reduced our earnings by 3%/2% in FY20 and FY21 respectively to factor higher credit costs. We maintain our rating and multiple, as we believe it can yet remain a CAGR 30%+ growth company over FY19-21E and maintain the momentum in the medium term as well. With its distribution network and digital technology being an entry barrier, we don’t believe it faces disruptive competitive threat. We maintain accumulate at 6.5x FY21E P/ABV.
We maintain our rating and multiple, valuing it at 6.5x FY21E P/ABV (lower our target price to ` 3590 from ` 3700).