Bajaj Finance shares
Bajaj Finance's shares fell by more than 7% on Friday, April 26, the same day the business reported its Q4 results. The share price of Bajaj Finance opened at Rs 7,008.60, down from its previous close of Rs 7,293.90, and subsequently dropped by as much as 7.2% to Rs 6,772.15 on the BSE.
Following the close of the market on Thursday, April 25, Bajaj Finance announced a 21% year-on-year (YoY) increase in consolidated net profit, reaching Rs 3,825 crore in Q4FY24.
Bajaj Finance in Q4FY24
The net interest income for Q4FY24 also saw a notable 28% YoY rise to Rs 8,013 crore, compared to Rs 6,254 crore in Q4 of FY23. However, the lender's net interest margin decreased by 21 basis points in Q4 compared to Q3.
Regarding asset quality, gross non-performing assets and net NPA stood at 0.85% and 0.37% as of March 31, 2024, respectively, showing improvement from 0.94% and 0.34% as of March 31, 2023.
Despite these financial figures, Bajaj Finance’s share price had gained approximately 20% over the last year as of the close on April 25. However, this performance was below the benchmark Sensex, which had gained about 24% during the same period.
Brokerages on Bajaj Finance
Religare Broking on Bajaj Finance
In a recent report by Religare Broking on Bajaj Finance, several key points were highlighted. The company experienced robust growth in its Assets under Management (AuM), primarily driven by the secured lending segment. However, margins continued to decrease.
The management remains optimistic about sustaining credit quality and anticipates the removal of restrictions on cards by the Reserve Bank of India (RBI).
From a financial standpoint, Religare Broking expects Net Interest Income (NII), Pre-Provision Operating Profit (PPOP), and Profit After Tax (PAT) to grow at a Compound Annual Growth Rate (CAGR) of 26%, 24%, and 25% respectively over the period FY24-26E.
Maintaining a positive outlook on Bajaj Finance, Religare Broking recommends a Buy rating with a target price of Rs 8,861. The valuation of the company is pegged at 5.4 times its FY26E Adjusted Book Value (Adj. BV).
Motilal Oswal on Bajaj Finance
Motilal Oswal Financial Services downgraded Bajaj Finance's shares to 'neutral' with a target price of ₹7,800, citing weak upside catalysts.
Despite projecting a healthy Profit After Tax (PAT) Compound Annual Growth Rate (CAGR) of nearly 25% over FY24-FY26E, and expecting a Return on Assets (RoA) and Return on Equity (RoE) of 4.3% and 22% respectively in FY26E, Motilal Oswal expressed concerns.
The brokerage stated that management's FY25 projection falls short of its long-term objectives in numerous metrics, including AUM growth, credit costs, RoA, and RoE.
Motilal Oswal also identified possible dangers linked with Bajaj Finance's development into additional product areas like as autos, tractors, commercial vehicles (CVs), and perhaps Microfinance Institutions (MFIs). Despite its well-diversified product mix, Motilal Oswal warned that this diversity might expose the company's growth to cyclicality.
Brokerage views
Brokerage Emkay said Bajaj Finance reported a good set of numbers in Q4 FY24, against the backdrop of the Reserve Bank of India's (RBI's) embargo on EMI and e-com cards which affected PBT by around 4 percent.
"Overall, we see the company progressing well on its long-range strategy targets. To reflect the Q4 developments and management guidance, we slightly tweak our estimates, leading to around (3 percent)-1 percent PAT change in FY25E-27E; we reiterate our 'Buy' rating with unchanged Mar-25E target price of Rs 9,000 per share," it further stated.
According to Religare Broking, the NBFC had good growth in AUM (Asset Under Management), led by the secured loan category; nonetheless, margins continued to drop.
"The decline in margin was mainly due to an increase in the cost of funds by 10bps QoQ/47bps YoY to 7.9 percent. In the future, the management expects that margin may see contraction by 30-40 basis points (bps) by H1 FY25 as the company continues to see an increasing proportion of secured lending in its portfolio," it stated.
"The management expects that the credit quality shall be sustained and awaits RBI to remove card restrictions. Financially, we expect NII/PPOP/PAT to grow at a CAGR of 26%/24%/25% over FY24-26E. We continue to remain positive on Bajaj Finance and thus, maintain Buy with a target price of Rs 8,861," Religare mentioned.
(Disclaimer: The opinions and recommendations expressed above are those of individual analysts, experts, and brokerage firms, not Dainik Saar. We recommend that investors consult with qualified specialists before making any financial choices.)
