Bajaj Finance share price rises over 2% after Q1 results; should you buy it?

Shares of Bajaj Finance have risen almost 19 per cent in the last one year against a 21 per cent gain in the equity benchmark Sensex.

Bajaj Finance Q1 Results: Bajaj Finance on Wednesday reported a consolidated net profit of ₹3,437 crore in the first quarter of FY24, up ₹32 per cent from ₹2,596.3 crore in the corresponding quarter of last year.

Net interest income (NII) of the non-banking finance company (NBFC), on a consolidated basis, in Q1FY24 increased by 26 per cnet to ₹8,398 crore from ₹6,640 crore, YoY. Bajaj Finance’s assets under management (AUM) grew by 32 per cent to ₹270,097 crore as of June 30, 2023, from ₹204,018 crore as of June 30, 2022.

Read more: Bajaj Finance Q1 results: Net profit rises 32% YoY to ₹3,437 crore; asset quality improves

Brokerages remain broadly positive

Many brokerage firms appear to be positive about the stock as they found Bajaj Finance’s Q1 numbers slightly ahead of their estimates.

Brokerage firm Motilal Oswal Financial Services maintained a buy call on Bajaj Finance stock with a target price of ₹8,800, implying an 18 per cent upside.

“Bajaj Finance’s Q1FY24 reported PAT jumped 32 per cent YoY to nearly ₹34.4 billion which was in line with estimates. The good operational performance was driven by: (a) a healthy run-rate in customer additions/new loans disbursed, (b) further asset quality improvement, and (c) YoY moderation in cost-income ratios during the quarter,” Motilal Oswal observed.

The brokerage firm pointed out that customer acquisitions and the new loan trajectory have been strong and the momentum will only get stronger ahead, with the digital ecosystem – app, web platform and full-stack payment offerings – in place.

“Bajaj Finance should be able to offset the NIM compression in FY24 with lower operating costs ratios and credit costs. We cut our FY25E EPS by nearly 2 per cent to factor in higher credit costs. We expect Bajaj Finance to deliver a PAT CAGR of 26 per cent over FY23-FY25 and an RoA (return on assets) and RoE (return on equity) of 4.6 per cent and 25 per cent, respectively, in FY25,” said Motilal Oswal.

Brokerage firm Nirmal Bang has revised its rating on the stock to an ‘accumulate’ from a ‘buy’ as it believes most positives are already factored in. However, it raised the target price to ₹7,948 from ₹7,000 earlier as it said Bajaj Finance’s Q1FY24 performance was better than its expectations.

“We roll forward our valuation to June 2025E ABV (adjusted book value) of ₹1,445 and assign a multiple of 5.5 times, based on which we derive a target price of ₹7,948 against ₹7,000 earlier, valued at 5.2 times FY25E ABV, which reflects an upside of 7 per cent,” said Nirmal Bang.

“The company’s comfortable asset quality, revamped digital and collection infrastructure, and its business transformation initiatives to revive growth are factors which give us confidence about good earnings growth in the coming quarters. However, the positives are already factored in the rich valuation of 5.4 times FY25E ABV and hence we revise our rating from ‘buy’ to an ‘accumulate’,” said Nirmal Bang.

Around 9:30 am, shares of Bajaj Finance traded 0.83 per cent higher at ₹7,492.45 on BSE.

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Disclaimer: The views and recommendations above are those of individual analysts and broking companies, not of Mint. We advise investors to check with certified experts before taking any investment decisions.

Updated: 27 Jul 2023, 09:36 AM IST