Shares of Bajaj Finance surged more than 11% in intraday trade on BSE on July 28 as investors cheered the company's June quarter earnings.
The stock ended 10.68% higher at ₹7076.30 on BSE on July 28.
As reported by Mint, Bajaj Finance witnessed a strong June 2022 (Q1FY23) quarter with net profit rising by a whopping 159% to ₹2,596 crore compared to ₹1,002 crore in the same quarter last year.
Net interest income (NII) climbed by 48% to ₹6,638 crore in the quarter under review from ₹4,489 crore in Q1 of last year. During Q1FY23, new loans booked jumped by 60% to 7.42 million as against 4.63 million in Q1FY22.
As of June 30, 2022, Bajaj Finance's asset under management (AUM) increased by 28% to ₹204,018 crore compared to ₹159,057 crore as of June 30, 2021. Core AUM growth was at ₹11,931 crore during Q1FY23.
Brokerages retain faith
Brokerage firm Motilal Oswal has a buy call on the stock with a target price of ₹7,320 as it expects the company to deliver a healthy AUM CAGR of about 26% over FY22-FY24.
Even though the management guided that it will prioritize margins over loan growth, NIM compression is likely in FY23 given that levers on borrowing costs have largely played out and it has limited ability to pass on the higher cost of funds on a large fixed-rate book, the brokerage firm said.
Motilal Oswal has increased its FY23E and FY24E PAT by 10% and 4%, respectively, to factor in higher fee income and lower credit costs. It expects Bajaj Finance to deliver an RoA and RoE of 4.4% and 22% over the medium term.
The evolution of its payments landscape and traction therein, velocity on the consumer app and the progress on the envisaged web platform, and potential foray into the credit card business from its own balance sheet and margin trajectory are the key things to watch out for in FY23E, Motilal Oswal said.
JM Financial also maintained a buy call on the stock with a target price of ₹9,000, citing the stock remains one of its top picks in the financial space.
The brokerage firm believes Bajaj Finance's growth will continue to be in good stead with healthy profitability ratios, given its emergence of an omnichannel player, extension in product offerings, relentless focus on margins and adequate risk management systems.
"We believe the company is poised to deliver superior profitability metrics with PAT CAGR of 43% over FY22-24E and sector-leading ROA/ ROE of 4.8%/ 24% in FY24E," JM Financial said.
Brokerage firm Nirmal Bang maintained a buy call on the stock with a target price of ₹8,122.
"We estimate that the core consumer finance business grew at a higher rate than the overall company growth rate. We believe this contributed to margin expansion in Q1FY23. In 4QFY22, the management highlighted heightened competition, which continues to remain elevated," said Nirmal Bang.
"Given the strong ALM management, the impact of increasing interest rates on CoF is expected to be gradual. The current quarter’s margin movement, coupled with management commentary on being able to ward off competition and increasing prices across products from June’22 indicates a positive margin outlook," the brokerage firm added.
According to a MintGenie poll, an average of 28 analysts have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking firms and not of MintGenie.