BUY CMP 1750.50 Target Price 1995.00 BAJAJ FINSERV LIMITED (CONSOLIDATED) Result Update: Q1 FY16 SEPTEMBER 26 th, 2015 ISIN: INE918I01018 Index Details Stock Data Sector Financial Services BSE Code 532978 Face Value 5.00 52wk. High / Low (Rs.) 2160.00/1001.00 Volume (2wk. Avg. Q.) 4764 Market Cap (Rs. in mn.) 278539.56 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY15A FY16E FY17E Net Sales 75870.10 89147.37 100290.79 EBITDA 55138.80 64845.52 73150.91 Net Profit 16897.90 19296.81 21390.36 EPS 106.20 121.27 134.43 P/E 16.48 14.43 13.02 Shareholding Pattern (%) (QUARTERLY) As on Jun-15 As on Mar-15 PROMOTER 58.35 58.35 FIIs 7.18 8.29 DIIs 8.39 7.39 OTHERS 26.08 25.97 1 Year Comparative Graph BAJAJ FINSERV LIMITED S&P BSE SENSEX Highlights Bajaj Finserv Ltd is the financial services company of the Bajaj Group, incorporated in April 30, 2007. Through its subsidiaries, provides various financial products and services in India. The Company s consolidated net profit rose by 46.19% to Rs. 4669.00 mn in the current June quarter of FY16 from Rs. 3193.70 mn in the same period previous year. In 1 st quarter of FY16, Consolidated revenue grew by 35.76% y-o-y of Rs. 22116.90 mn against Rs. 16290.70 mn in the corresponding period of the previous year. Operating profit or EBIDTA ramps up by 37.90% from Rs. 11614.70 mn to Rs. 16016.50 mn in Q1 FY16. Profit before Tax (PBT) at Rs. 9251.50 million in Q1 FY16 compared to Rs. 6581.20 million in Q1 FY15, registered a growth of 40.57%. The company has reported an EPS of Rs. 29.34 for the 1st quarter as against an EPS of Rs. 20.07 in the corresponding quarter of the previous year. Bajaj Finserv s surplus funds stood at Rs. 72510 million as on 30 th June, 2015 and Consolidated Net Worth stood at Rs. 120397 million as of Q1 FY16. Net Sales and PAT of the company are expected to grow at a CAGR of 19% and 18% over 2014 to 2017E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Bajaj Finserv Ltd 1750.50 278539.56 106.20 16.48 2.54 35.00 Shriram Transport Finance Co Ltd 876.56 198874.10 55.20 15.88 2.15 100.00 Rural Electrification Corporation Ltd 168.00 264639.00 55.25 4.85 1.06 107.00 Reliance Capital Ltd 354.35 89520.40 31.67 11.19 0.71 90.00
QUARTERLY HIGHLIGHTS (CONSOLIDATED) Results updates- Q1 FY16 Rs. In Mn June-15 June-14 % Change Net Sales 22116.90 16290.70 35.76 Net Profit 4669.00 3193.70 46.19 EPS 29.34 20.07 46.19 EBITDA 16016.50 11614.70 37.90 Bajaj FinServ Limited has achieved a turnover of Rs. 22116.90 million for the 1 st quarter of the financial year 2016 as against Rs. 16290.70 million in the corresponding quarter of the previous year. The company has reported an EBITDA of Rs. 16016.50 million, rise up by 37.90% y-o-y in Q1 FY16. Net Profit of Rs. 4669.00 million in Q1 FY16 compared to Rs. 3193.70 million in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 29.34 for the 1 st quarter as against an EPS of Rs. 20.07 in the corresponding quarter of the previous year. Break up of Expenditure Rs. In Million Q1 FY16 Q1 FY15 CHNG % Marketing & Other Commissions 885.70 695.90 27% Other Expenditure 1693.80 1220.70 39% Recovery Cost 554.30 468.50 18% Provisions & Loan Losses 1032.90 829.20 25% Employee Benefit Expenses 1693.80 1220.70 39% Depreciation 118.70 84.90 40% Transfer to Policyholders Account 113.40 64.30 76%
Segment Revenue ( Values in million) Segment Wise Revenue Q1 FY16 Q1 FY15 CHNG % Insurance 27726.80 22947.10 21% Investments & Others 591.20 423.50 40% Retail financing 16558.80 12459.60 33% Windmill 141.70 135.40 5% Result Updates Bajaj Finserv s surplus funds stood at Rs. 72510 million as on 30 th June, 2015. As on 30 th June 2015, Consolidated Net Worth stood at Rs. 120397 million. Consolidated Book Value Per Share stood at Rs 757as of Q1 FY16. Total Income has increased from Rs. 16299.30 million for the quarter ended June 30, 2014 to Rs. 22118.60 million for the quarter ended June 30, 2015. Standalone results for the quarter ended 30 th June, 2015 The Company has posted a net profit of Rs. 135.90 million for the quarter ended June 30, 2015 as compared to Rs. 79.70 million for the quarter ended June 30, 2014. Total Income has increased from Rs. 255.40 million for the quarter ended June 30, 2014 to Rs. 390.80 million for the quarter ended June 30, 2015.
COMPANY PROFILE Bajaj Finserv Ltd is the financial services company of the Bajaj Group, incorporated in April 30, 2007 as a result of its demerger from Bajaj Auto Limited to act as a pure play financial services business. The process of demerger was completed in Feb 2008. The company s ultimate goal is not only to looks in high growth business areas of Auto, Insurance, Finance sectors and Wind Power but also to run independently these core businesses and to strengthen the competencies. The demerger has enabled investors to hold separate focused stocks and also facilitate transparent benchmarking of the companies to their peers in their respective industries. Bajaj Finserv Ltd., through its subsidiaries, offers consumer finance, including consumer durable, personal, small business, and construction equipment loans; loans against property and shares; two and three wheeler financing; and insurance services for individuals/institutions. Further, it is involved in the generation and sale of wind power; and operation of 138 windmills with an installed capacity of 65.2 MW in Maharashtra. Subsidiaries Bajaj Finserv Ltd participates in financing business through Bajaj finance Ltd in which it has 57.53% holdings as at 30 th June 2015. Bajaj Finserv participates in the insurance business through - 74% holding in Bajaj Allianz Life Insurance Company Ltd. and Bajaj Allianz General Insurance Company Ltd. and in the lending business through - 74% holding in Bajaj Finance Ltd. BAJAJ FINANCE LIMITED Diversified NBFC present in consumer finance, SME & commercial lending. Market leader in consumer durables financing, & motorcycle financing. Assets under management stood at Rs.355570 mn, an increase of 10% as on 30 th June 2015 against Rs.324100 mn as on 31 March 2015. Profit after tax for Q1 FY16 increased by 31% to Rs.2760 mn from Rs.2110 mn for Q1 FY15. BAJAJ ALLIANZ GENERAL INSURANCE A leading brand and number 2 private non-life insurence in India. Net earned premium for Q1 FY16 stood at Rs. 9990 mn against Rs. 9210 mn in Q1 FY15, an increase of 8%. Profit after tax for Q1 FY16 increased by 13% to Rs. 1470 mn against Rs. 1300 mn in Q1 FY15. Cash and investments as on 30 th June 2015 stood at Rs. 82010 mn. BAJAJ ALLIANZ LIFE INSURANCE Bajaj Allianz Life insurance is one of the most profitable life insurers in India and 4 th largest private player in India. Total investments as on 30 th June 2015 stood at Rs. 432690 mn. Net Business premium recorded a significant growth of 71% to Rs. 6740 mn in Q1 FY16 as against Rs. 3940 mn in Q1 FY15.
BAJAJ FINANCIAL SOLUTIONS (Wealth Management Business) Bajaj Financial Solutions Ltd., a newly formed 100% subsidiary of Bajaj Finserv, would provide Financial Advise and also distribute financial products to the individuals and has started its operations in the first half of 2011. Bajaj Financial Solutions intends to be a financial advisor for every individual/institution. By understanding the portfolio needs and risk profiles of customers, it will offer portfolio advisory and investment planning services. Focus is on cross-selling financial advisory and wealth management services to existing customers.
FINANCIAL HIGHLIGHT (CONSOLIDATED) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March31, 2014-2017E FY-14A FY-15A FY-16E FY-17E I. EQUITY AND LIABILITIES A) Shareholder's Funds a) Share Capital 795.60 795.60 795.60 795.60 b) Reserves and Surplus 92315.90 108850.80 126659.26 144391.56 Sub Total - Net worth 93111.50 109646.40 127454.86 145187.16 B) Fund for future appropriations 1839.50 1244.10 1094.81 1149.55 C) Minority interest 35415.10 42255.40 49185.29 54251.37 D) Non Current Liabilities a) Long term borrowing 103002.60 179310.10 228620.38 274344.45 b) Deferred Tax Liabilities 104.60 113.60 123.14 131.76 c) Linked liabilities 19561.20 30445.80 38179.03 44669.47 d) Other Long term liabilities 1055.00 1357.70 1566.79 1770.47 e) Policy liabilities 106037.00 132323.90 151378.54 168030.18 f) Discontinued Fund Liabilities 1455.00 2844.20 3936.37 4723.65 g) Long term Provisions 1209.70 1743.70 2238.91 2664.30 Sub Total - Non Current liabilities 232425.10 348139.00 426043.16 496334.28 E) Current Liabilities a) Short term borrowings 54727.80 43139.00 47280.34 50117.16 b) Trade payables 51151.00 53608.20 55966.96 57645.97 c) Linked liabilities 193314.80 186002.70 177446.58 180285.72 d) Other Current liabilities 45054.90 55393.80 67248.07 79352.73 e) Policy liabilities 11047.50 13731.50 15708.84 17436.81 f) Short term Provisions 25824.20 29524.10 33480.33 37497.97 Sub Total - Current liabilities 381120.20 381399.30 397131.12 422336.36 TOTAL EQUITY AND LIABILITIES (A + B + C + D + E) 743911.40 882684.20 1000909.24 1119258.72 II. ASSETS F) Non-Current Assets: a) Fixed Assets 8347.70 8344.00 8638.18 8853.37 b) Goodwill on consolidation of subsidiary/associates 4290.30 4290.30 4290.30 4290.30 c) Non-current investments 114566.40 132615.30 149059.60 163965.56 d) Policyholders investments 103741.20 124505.90 143430.80 162650.52 e) Assets held to cover linked liabilities 29098.40 33088.30 36860.37 40546.40 f) Deferred Tax Asset 1710.60 2575.50 3384.21 4061.05 g) Long Term loans and advances 3101.30 3297.70 3449.39 3587.37 h) Receivables under financing activity 138524.20 181196.70 217798.43 257002.15 i) Other non-current assets 8484.60 3884.70 3030.07 2575.56 Sub Total - Non Current Assets 411864.70 493798.40 569941.34 647532.28 G) Current Assets a) Current Investment 8882.90 17378.70 23530.76 30589.99 b) Policyholders investments 11621.00 19872.90 24920.62 29904.74 c) Assets held to cover linked liabilities 183777.60 183362.10 187396.07 192268.36 d) Assets held to cover discontinued funds 1455.00 2842.30 3751.84 4689.80 e) Receivables under financing activity 91185.30 130797.80 151987.04 170225.49 f) Trade receivables 3703.80 5414.50 6778.95 7999.17 g) Cash and Bank Balances 20609.90 13995.80 14415.67 15568.93 h) Short-terms loans & advances 3942.40 4399.10 4795.02 5178.62 i) Other current assets 6868.80 10822.60 13391.93 15301.35 Sub Total - Current Assets 332046.70 388885.80 430967.90 471726.44 Total Assets (F+G) 743911.40 882684.20 1000909.24 1119258.72
Annual Profit & Loss Statement for the period of 2014 to 2017E Value(Rs. mn) FY14A FY15A FY16E FY17E Description 12m 12m 12m 12m Net Sales 60210.20 75870.10 89147.37 100290.79 Other Income 39.70 33.70 35.39 38.92 Total Income 60249.90 75903.80 89182.75 100329.71 Expenditure -15306.30-20765.00-24337.23-27178.80 Operating Profit 44943.60 55138.80 64845.52 73150.91 Interest -15618.70-22295.80-26821.85-30576.91 Gross profit 29324.90 32843.00 38023.67 42574.00 Depreciation -308.80-381.50-465.43-535.24 Profit Before Tax 29016.10 32461.50 37558.24 42038.76 Tax -7106.80-8419.40-9802.70-11056.19 Profit After Tax 21909.30 24042.10 27755.54 30982.56 Minority Interest -6468.50-7144.20-8458.73-9592.20 Net Profit 15440.80 16897.90 19296.81 21390.36 Equity capital 795.60 795.60 795.60 795.60 Reserves 92315.90 108813.80 126659.26 144391.56 Face value 5.00 5.00 5.00 5.00 EPS 97.04 106.20 121.27 134.43 Quarterly Profit & Loss Statement for the period of 31 st Dec, 2014 to 30 th Sep, 2015E Value(Rs. mn) 31-Dec-14 31-Mar-15 30-Jun-15 30-Sep-15E Description 3m 3m 3m 3m Net sales 19044.30 24058.20 22116.90 22249.60 Other income 9.10 8.30 1.70 2.05 Total Income 19053.40 24066.50 22118.60 22251.65 Expenditure -5592.20-5930.40-6102.10-6096.39 Operating profit 13461.20 18136.10 16016.50 16155.26 Interest -5875.10-6027.50-6646.30-7111.54 Gross profit 7586.10 12108.60 9370.20 9043.72 Depreciation -105.90-99.40-118.70-127.01 Profit Before Tax 7480.20 12009.20 9251.50 8916.71 Tax -2383.20-2270.30-2481.20-2345.09 Profit After Tax 5097.00 9738.90 6770.30 6571.61 Minority Interest -1623.30-2717.30-2101.30-1987.83 Net Profit 3473.70 7021.60 4669.00 4583.78 Equity capital 795.60 795.60 795.60 795.60 Face value 5.00 5.00 5.00 5.00 EPS 21.83 44.13 29.34 28.81
Ratio Analysis Particulars FY14A FY15A FY16E FY17E EPS (Rs.) 97.04 106.20 121.27 134.43 EBITDA Margin (%) 74.64 72.68 72.74 72.94 PBT Margin (%) 48.19 42.79 42.13 41.92 PAT Margin (%) 36.39 31.69 31.13 30.89 P/E Ratio (x) 18.04 16.48 14.43 13.02 ROE (%) 23.53 21.93 21.78 21.34 ROCE (%) 18.04 16.72 16.19 15.69 Debt Equity Ratio 1.69 2.03 2.16 2.23 EV/EBITDA (x) 9.05 8.52 7.96 7.61 Book Value (Rs.) 585.17 688.85 801.00 912.44 P/BV 2.99 2.54 2.19 1.92 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs. 1750.50, the stock P/E ratio is at 14.43 x FY16E and 13.02 x FY17E respectively. Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.121.27 and Rs.134.43 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 19% and 18% over 2014 to 2017E respectively. On the basis of EV/EBITDA, the stock trades at 7.96 x for FY16E and 7.61 x for FY17E. Price to Book Value of the stock is expected to be at 2.19 x for FY16E and 1.92 x for FY17E. We recommend BUY in this particular scrip with a target price of Rs.1995.00 for Medium to Long term investment. INDUSTRY OVERVIEW On the economic front, India seems to be witnessing a slow pick-up in growth. According to the Central Statistical Organisation (CSO) of the Government of India, growth of real Gross Value Added (GVA), the new measure of national income, is estimated at 7.5% for 2014-15 (FY2015) which, if it were to happen, would be 0.9 percentage points higher than the 6.6% growth achieved in FY2014. Moreover, significantly reduced crude oil prices as well as lower food prices, have contributed to a fall in consumer price inflation from an average of 8.7% between 2012 and 2015 to 5.2% in March of 2015. The current account deficit is presently at 1.7% of GDP, which is better than what it was earlier. The Reserve Bank of India (RBI) has cut policy rates by 25 bps in January 2015 followed by another 25 bps in March 2015, and eased liquidity with a reduction in the statutory liquidity ratio (SLR) in three tranches of 50 bps in June 2014, August 2014 and February 2015. Despite these positive developments, FY2015 was difficult for the banking and financial services sector. At 9.5%, credit growth was at its lowest in the last 18 years. Low credit growth plus high non-performing assets (NPAs) have resulted in banks being reluctant to pass on the benefits of the eased liquidity and rate cuts. Besides, unseasonal heavy rains in February and March 2015 badly affected the winter (rabi) crop; and a prediction of a poor monsoon could dampen some of the latent economic optimism. Overall, it would be fair to say that conditions continue to be challenging for the financial sector as a whole. Under such circumstances, the strong growth delivered by BFL and BAGIC is a testimony to the resilience of the group as well as the quality of the Management across these enterprises. Even BALIC, which faced challenges in coping with significant changes in market dynamics, has marginally improved on its new businesses.
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