Bajaj Finance’s stock witnessed a decline of over 7% on Friday, April 26, coinciding with the day the company released its Q4 results. The share price of Bajaj Finance opened at Rs 7,008.60, down from its previous close of Rs 7,293.90, and subsequently dropped by as much as 7.2% to Rs 6,772.15 on the BSE.
Following the close of the market on Thursday, April 25, Bajaj Finance announced a 21% year-on-year (YoY) increase in consolidated net profit, reaching Rs 3,825 crore in Q4FY24.
Bajaj Finance in Q4FY24
The net interest income for Q4FY24 also saw a notable 28% YoY rise to Rs 8,013 crore, compared to Rs 6,254 crore in Q4 of FY23. However, the lender’s net interest margin contracted by 21 basis points in Q4 compared to Q3.
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Regarding asset quality, gross non-performing assets and net NPA stood at 0.85% and 0.37% as of March 31, 2024, respectively, showing improvement from 0.94% and 0.34% as of March 31, 2023.
Despite these financial figures, Bajaj Finance’s share price had gained approximately 20% over the last year as of the close on April 25. However, this performance was below the benchmark Sensex, which had gained about 24% during the same period.
Brokerages on Bajaj Finance
Religare Broking on Bajaj Finance
In a recent report by Religare Broking on Bajaj Finance, several key points were highlighted. The company experienced robust growth in its Assets under Management (AuM), primarily driven by the secured lending segment. However, there was a continuous decline in margins.
The management remains optimistic about sustaining credit quality and anticipates the removal of restrictions on cards by the Reserve Bank of India (RBI).
From a financial standpoint, Religare Broking expects Net Interest Income (NII), Pre-Provision Operating Profit (PPOP), and Profit After Tax (PAT) to grow at a Compound Annual Growth Rate (CAGR) of 26%, 24%, and 25% respectively over the period FY24-26E.
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Maintaining a positive outlook on Bajaj Finance, Religare Broking recommends a Buy rating with a target price of Rs 8,861. The valuation of the company is pegged at 5.4 times its FY26E Adjusted Book Value (Adj. BV).
Motilal Oswal on Bajaj Finance
Following the Q4 results, Motilal Oswal Financial Services downgraded Bajaj Finance’s stock to ‘neutral’ and set a target price of ₹7,800, citing limited upside catalysts for the company.
Despite projecting a healthy Profit After Tax (PAT) Compound Annual Growth Rate (CAGR) of nearly 25% over FY24-FY26E, and expecting a Return on Assets (RoA) and Return on Equity (RoE) of 4.3% and 22% respectively in FY26E, Motilal Oswal expressed concerns.
The brokerage noted that the management’s guidance for FY25 falls below its long-term targets across several metrics, including Assets under Management (AUM) growth, credit costs, RoA, and RoE.
Motilal Oswal also highlighted potential risks associated with Bajaj Finance’s expansion into newer product segments such as cars, tractors, commercial vehicles (CVs), and potentially Microfinance Institutions (MFI). Motilal Oswal also cautioned that this diversification could expose the company’s growth to cyclicality despite having a well-diversified product mix.
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