scorecardresearchBajaj Finance: Stellar result but CLSA says 'sell'; Target price of <span class='webrupee'>₹</span>6000; Here's why
Bajaj Finance announced its highest-ever consolidated profit after tax of  <span class='webrupee'>₹</span>7,028 crore
Bajaj Finance announced its highest-ever consolidated profit after tax of  <span class='webrupee'>₹</span>7,028 crore

Bajaj Finance: Stellar result but CLSA says 'sell'; Target price of 6000; Here's why

Updated: 27 Apr 2022, 01:25 PM IST
TL;DR.

Bajaj Finance announced its highest-ever consolidated profit after tax of 7,028 crore in the fiscal year ended March 2022.

Shares of Bajaj Finance were trading at 6785.30, down from 6.22% from the previous close on the BSE in trade on April 27, 2022, despite the company's highest ever consolidated net profit of 2,420 crore, a 79.67% year-on-year jump for the fourth quarter. The stock is currently trading at 1,200 lower than its 52-week high.

Bajaj Finance announced its highest-ever consolidated profit after tax of 7,028 crore in the fiscal year ended March 2022, a 59 percent increase. In 2020-21, the net profit was 4,420 crore.

The non-banking finance company's net interest income (NII) increased by 30% to 6,068 crore in the March quarter, up from 4,659 crore in the previous quarter. New loans booked grew by 15 per cent to 6.28 million, as against 5.47 million in the same quarter last year.

As of 31 March 2022, assets under management (AUM) grew by 29 per cent to 1,97,452 crore (including IPO financing receivables of 5,365 crore) from 1,52,947 crore as of 31 March 2021. The core AUM growth in Q4FY22 was 10,837 crore.

Loan losses and provisions for the year were at 4,803 crore as against 5,969 crore in the year-ago period.

GNPA and NNPA stood at 1.60 percent and 0.68 percent as of March 31, 2022, as against 1.73 percent and 0.78 percent as of December 31, 2021.

The company also announced a dividend of 20 per share. The record date for the payment of the dividend is July 1, 2022.

Stock performance

Bajaj Finance stock has risen 40.06 percent in the last year, compared to a 22 percent rise in the S&P BSE Sensex, and it has risen 120.02 percent in the last three years.

Stock price movement of Bajaj Finance&nbsp;
Stock price movement of Bajaj Finance 

Further, over the past five years, the market price of the stock has zoomed by 429.97 percent.

The future holds?

Global research firm CLSA, in a report dated April 27, 2022 gave a ‘SELL’ recommendation and a Target Price (TP) of 6000 per share share, implying a downside of 11% from current market price. 

It said that Bajaj Finance missed the Q4 profit after tax (PAT) estimate by 9% on account of a 6% NII miss. CLSA also cut PAT estimates by 8% and 9% for the current and next year, respectively. 

CLSA highlighted two key trends in commercial lending (ex-IPO financing) that have increased from 7.6% to 11.2% in the past two years, and this is a low-yielding loan book, and the average ticket size of home loans and LAP has increased from 17% to 19% in the past two years, and this is adding to mortgage growth, it added.

CLSA stated that it has been highlighting a growing disconnect between the valuations of top-quality banks and Bajaj Finance over the past year in the context of shrinking growth outperformance (FY22 loan growth difference between large private banks and BAF was only 500bps versus 1,500bps pre-Covid). CLSA believes that Bajaj Finance's fintech initiatives are a hygiene factor rather than a value driver.

An average of 28 analysts polled by MintGenie 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.

The NBFCs offer a higher rate of return on fixed deposits but for a higher risk.
The NBFCs offer a higher rate of return on fixed deposits but for a higher risk.
First Published: 27 Apr 2022, 01:23 PM IST