Bajaj Finance share price surges 5% after company’s Q1 profit more than doubles; should you buy, hold or sell?

Bajaj Finance share: After the business announced a 155 percent year-over-year increase in consolidated net profit at Rs 2,533.40 crore from the Apr-June quarter, topping street estimates, Bajaj Finance share’s share price soared 5 percent to Rs 6,739 on NSE.

After the business announced a 155 percent year-over-year increase in consolidated net profit at Rs 2,533.40 crore from the Apr-June quarter, topping street estimates, Bajaj Finance’s share price soared 5 percent to Rs 6,739 on NSE.

Bajaj Finance share

In the comparable quarter the year before, Bajaj Finance reported a profit of Rs. 993.85 crores. To reach Rs 6,638 crore, net interest income (NII) climbed by 48 percent yearly. The business also saw its customer franchise expand by 2.73 million, the largest quarterly increase ever. Bajaj Finance stock has lost more than 7% of its value this year, trailing benchmark Nifty 50. Despite the stock’s high growth trend, analysts have differing opinions.

Should you purchase, hold, or sell shares of Bajaj Finance?

Mr. Oswal Motilal Purchase

target: Rs 7,320; potential gain of 14%

Bajaj Finance’s client acquisitions and new loan trajectory have been strong, say analysts Motilal Oswal, and the momentum will only continue to grow now that the company has a complete digital ecosystem, including an app, a web platform, and full-stack payment options. They anticipate Bajaj Finance will generate a respectable AUM CAGR of 26% from FY22 to FY24. The ability to pass on the increased cost of funds to a sizable fixed-rate book and the levers on borrowing costs have mostly played out, making analysts feel that NIM compression is probable in FY23, despite the management’s guidance that it will prioritize margins above loan growth.

With a target price of Rs 7,320, the brokerage confirmed its “buy” rating on the stock (premised on 7x FY24E BVPS). The progression of the consumer app and the planned online platform, the evolution of the payments landscape and traction therein, a prospective entry into the credit card market from its balance sheet, and the trajectory of margins are the main topics to keep an eye on in FY23.

Kotak Securities: Sell

for Rs. 5,400 at fair value.

While the present growth and return matrices are still solid, according to Kotak Securities, the competitive environment and macroeconomic news may not be enough to support Bajaj’s high valuations. A chance to reduce risk exists, given the recent stock market surge. The stock’s rating was cut by the brokerage to “Sell,” with a fair value (FV) of Rs 5,400. (4.9X book; rolled over to Rs5,100). It warned that any plan to apply for a bank license and any delay in implementing the digital strategy ran the risk of further downgrading. The increased profitability of house loans (a fast-growing industry in FY2024E) and faster growth in rural businesses are sources of upside risk.

Buy from JM Financial

Target price: Rs. 9,000; potential upside: 40%

Bajaj Finance’s Q1FY23 results, according to analysts at JM Financial Services, show overall strength due to its skillful liability management, ongoing customer acquisition momentum, and normalization of credit costs to pre-Covid levels. “Management voiced confidence that margins would stay at their current level for the next three quarters and that the impact of growing CoF would be moderate. Additionally, management anticipates a drop in CIR beginning in FY24 as operating leverage begins to take effect. RoA and RoE were 4.8 percent and 24.2 percent, respectively, according to the brokerage’s predicted 27 percent AUM CAGR throughout the FY22–24 period. One of JMFL’s top picks in the banking sector continues to be Bajaj Finance. With a target price of Rs 9,000, it kept its “buy” recommendation on the stock.

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