Bajaj Finance registered strong growth in the third quarter. Should you buy this NBFC stock?

In Q3FY23, Bajaj FinanceNew loans booked were the highest ever at 7.84 million. The third quarter saw the highest ever quarterly increase in customer franchisees by 3.14 million – taking the total to 66.05 million as of December 31, 2022. assets under management (AUM) increased by 27% 230,842 crore in Q3.

Meanwhile, net interest income came in 7,435 crore by 24% YoY. Gross NPA & Net NPA as on December 31, 2022, stood at 1.14% and 0.41%, respectively, as against 1.73% and 0.78% as on December 31, 2021. The company has a provision coverage ratio of 64% on Stage 3 assets and 116 bps on Stage 1. and 2 properties by December 31, 2022.

Prahudas Lilladher analysts Akshay Ashok and Raj Mange said in their research note, “BAF’s Q3FY23 earnings (PAT Rs 29.7 billion) were in line with our estimates (PLe: Rs30 billion) due to strong NII growth. PPoP assisted. Healthy NII grew 8.2% QoQ/23.8% YoY to Rs48.5 billion above our estimates [ PLe of Rs47.9 billion], Margins remained intact as rate hike had no adverse impact on cost of funds and NIM for Q3FY23 stood at 13.24% versus 13.26% in Q2FY23.”

In terms of asset quality, the duo’s note said, BAF’s asset quality displayed improvement during Q3FY23 (1) Significant improvement in auto finance asset quality (GNPA% 5.99% vs 8.01% (Q3FY23)) (2) ECL Stage 3 provision 8.4 billion Vs. 7.3 billion (Q2FY23) (3) PCR largely stable at 64% vs 62% (Q2FY23). Overall Phase 2 erected on the property As against 3.94 billion by 31 December 2022 4.38 billion by 30 September 2022.

Meanwhile, the company also registered healthy core performance. The note said, “In Q3FY23, BAF reported its highest ever customer franchise growth in a single quarter- bettering the record set in Q1’23 as well. Company added 3.14 million customers, customer franchise grew 4.9% QoQ to 66.05 million and AUM grew at 5.7.%QoQ/27.4%YoY to Rs2,308 billion. On a QoQ basis, AUM growth was driven by consumer B2C business (6.6%+) and rural B2C (4.1%+). SME business growth 4.5 %QoQ was sluggish at 8% vs. Q2’23 showed QoQ growth. AUM growth in mortgages was slow at 3.3% QoQ due to intense pricing pressure.”

On valuations, the duo note, “The impact of rate hikes on cost of funds is more gradual than anticipated. However, many of our stands have come down, as competition intensifies, particularly in the consumer finance and mortgage segments.” remains high, as well as the company’s plans to enter the risky sector. microfinance business. However, if the company executes a long-range strategy framework and increases the stickiness of new franchisee customers, May re-rate. Maintain ‘Buy’.” But analysts have cut their price targets. 7,835 at (7x Sep’24E PABV) from 8,953 (earlier: 8.4x Sep’24E PABV).

In long range strategy, the brokerage’s note said Bajaj Finance has issued LRS which is an annual 5-year rolling strategy planning process with an execution plan of 12-24 months. As part of LRS, the company analyzes macro, industry outlook, technology megatrends, business megatrends and selects a leading benchmark company to learn from.

In addition, the company plans to launch new auto loans in Q2 FY24, micro finance in Q4 FY24 and tractor financing in Q1 FY25. It plans to open 100 locations in UP, Bihar and North-East and another 100 locations in FY25.

Bajaj Finance shares closed at Rs. 5,756 on the BSE, down 0.71%. The company’s market cap is over 3.48 lakh crore.

Disclaimer: The views and recommendations given above are of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.