Bajaj Finance Shares In Red After Q1, But Brokerages Remain Bullish

Bajaj Finance‘s share price was in the red on Wednesday morning after the company posted lukewarm earnings for the quarter ended June.

What Happened: The non-banking financial company reported a consolidated net profit of ₹3,911.98 crore for the quarter, marking a 14% increase from ₹3,436 crore in the same period last year. Net interest income rose by 24% to ₹8,366 crore from ₹6,717 crore.

The lender's gross non-performing assets (NPAs) were slightly higher at 0.86%, up from 0.85% quarter on quarter, while net NPA increased to 0.38% from 0.37% at the end of March. The provision coverage ratio stood at 56%, down from 57% in the previous quarter. Assets under management (AUM) grew 31% to ₹3.54 lakh crore, compared with ₹2.70 lakh crore as of June 30, 2023.

Brokerage Reactions: Most brokerages remained positive on the stock. Morgan Stanley maintained its “overweight” rating on Bajaj Finance with a target price of ₹9,000.

The company's net credit costs came in at the higher end of its guidance. Morgan Stanley expects the stock’s performance to be muted in the near term but sees improvement in the second half of FY25 as earnings growth inflects and asset quality improves.

Jefferies also maintained its “buy” rating on the stock with a target price of ₹7,780 but noted that the company’s net profit missed its estimates. A sharper rise in credit costs to 2.3% of average AUM was a key drag, it said. Despite healthy AUM growth of 31% year on year, asset quality was weaker, and a fall in net interest margins (NIMs) may lead to slower growth in the future, the analysts added.

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ICICI Securities also maintained its “buy” rating for the stock with a target price of ₹8,500, saying Bajaj Finance's June quarter results were largely in line except for credit cost, which were higher than guided. “Its resilient business model, built on strong customer acquisition engines and cross-sell, augurs well for maintaining leadership in the NBFC space,” the brokerage firm added.

HDFC Securities maintained its “buy” rating for the stock with a price target of ₹8,810. The analysts said that the NBFC’s earnings were below its estimates on account of elevated provisioning and NIM compression, offsetting strong AUM growth.

Axis Securities also reiterated its “buy” rating for the stock with a target price of ₹7,850. The brokerage said that while near-term headwinds on NIMs and credit cost could dampen the performance, it remains positive on the NBFC’s growth prospects over the medium term.

“The healthy growth in the existing products alongside the successful scale-up of new products should support strong AUM growth of 26% CAGR (compound annual growth rate) growth over FY24-27E,” the brokerage added.

Price Action: Bajaj Finance’s share price was down 1.72% to trade at ₹6,611.70 as the markets opened on Wednesday.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.