Shares of Bajaj Finance, an NBFC firm, on Monday broke a four-day losing streak, rising 4.53%, only to slip back into the red zone on Tuesday. The stock closed over 2% lower at ₹5,881 per share on the BSE today.
The stock started to plummet after hitting a 52-week high of ₹7,778 apiece in September and it has since dropped by over 24.50%. However, following the company's strong performance in the December quarter, brokerage firms maintained their positive views on the stock.
On January 27, the company reported a 40% jump in its consolidated net profit to ₹2,973 crore in Q3 FY23, driven by a fall in provisions and an increase in net interest income. The company had posted a net profit of ₹2,125.3 crore in the corresponding quarter of last year.
The total revenue from operations came in at ₹10,786 crore in Q3FY23, a growth of 26.37% compared to ₹8,535.1 crore in the year-ago quarter. The net interest income of the non-banking lender rose by 28% YoY to ₹7,435 crore in the December g quarter. In addition, the company's assets under management grew by 27.4% on year to ₹2,30,842 crore.
On the asset quality front, the gross NPA fell to 1.14% in Q3FY23 from 1.73% in Q3FY22, while the net NPA came down to 0.41% in Q3FY23 from 0.78% in the similar quarter last year.
Meanwhile, the company said it added 3.14 million new credit customers during the October-December quarter and 7.84 million so far this fiscal year, making this the highest ever for the non-banking lender focused on retail finance, and taking its total customer franchise to 66.05 million, up 19 percent from 55.36 million in December 2021.
Brokerage firm Axis Securities revised its rating on the stock to "buy" from "hold," with a revised target price of ₹7,400 apiece from ₹8,600 earlier.
The recent correction in BAF’s stock price offers a good entry point for a long-term perspective, given BAF’s potential to register strong and sustainable AUM and earnings growth, said the brokerage.
Even as the operational metrics continue to tread well, a focus on maintaining margins and increasing competitive intensity may result in a marginal slowdown in the growth momentum. “We expect BAF to grow its AUM at a 25% CAGR over FY23–25E,” it added.
Axis Securities raised its earnings estimates by 1-2% over FY23–25E to reflect the improving operational profitability driven by operating leverage emerging and muted credit cost trends. It expects the company to deliver a healthy earnings growth of 23% CAGR over FY23–25E.
Likewise, ICICI Direct Research also maintained a "buy" call on the stock with a revised target price of ₹7,250 apiece from an earlier price of ₹8,650, indicating an upside of 20.41%.
Over the last two years, the stock has gained 20%.
“We believe the long-range strategy to reach 4-5% of retail credit (3.5% by FY27E) in India is believable considering the management’s proven track record on meeting guidance. Valuations are likely to stay at a premium. The management reiterated that it has no plans to convert into a bank,” it said.
Further, HDFC Securities said the company managed to deliver healthy AUM growth despite elevated competitive intensity in select segments such as home loans and B2B finance. The brokerage upgraded the stock to "ADD" with a revised target price of ₹6,700 apiece from an earlier price of ₹7,314.
"Our reduced stance on BAF was largely centered on a downside risk to growth and an expensive valuation." "However, the 20% valuation correction in the past three months offers some respite on multiples," said HDFC Securities.
30 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.