Shares of Bajaj Finance witnessed a trend reversal on Wednesday as the stock climbed over 4% after falling nearly 9% in the last eight consecutive sessions. The non-banking financial (NBFC) stock gained momentum after it released its September quarter earnings post-market hours on Tuesday.
Reacting to Q2 numbers, Bajaj Finance shares opened higher at ₹6,639.95, up 0.56% against the previous closing price of ₹6,677.40 on the BSE. In the first hour of trade so far, the most valued NBFC stock gained as much as 4.2% to ₹6,958.50, with the market capitalisation rising over ₹4.26 lakh crore. The counter has moved in a narrow range in the last one year, touching its 52-week high of ₹7,857.40 on October 25, 2023, and a 52-week low of ₹6,190 on March 6, 2024.
In the last one year, Bajaj Finance shares have corrected over 10%, while it lost nearly 4% in six months. In the calendar year 2024, the NBFC heavyweight has fallen over 4%, whereas it slipped nearly 8% in the past one month.
Technically, Bajaj Finance shares have turned ‘Mildly Bullish’ from ‘Bullish’, trading higher than 5-day and 200-day moving averages, but lower than 20-day, 50-day and 100-day moving averages.
Post Q2 numbers, Motilal Oswal maintained a ‘Neutral’ rating on the stock with a target price of ₹7,320, an upside potential of 10% from current level. “While the valuations are attractive at 3.6x P/BV and 19x FY26E P/E, we believe that the asset quality stress is becoming more broad-based and spilling over to product segments across its retail and SME offerings,” it says in a note.
Axis Securities has maintained ‘BUY’ recommendation on the stock, with a target price of ₹7,655 per share from ₹7,850 estimated earlier. “Though near-term challenges persist on asset quality, they are likely to settle as the company exits FY25, backed by proactive measures taken by the company.”
“Factoring in higher credit costs, we trim our earnings estimates by 2-3% over FY25-27E. Given expectations of NIMs stabilising, improving operational efficiency enabling cost ratio improvement and gradually improving credit costs, we expect BAF to deliver a healthy RoA/RoE of 4.4-4.5%/19-22% over FY25-27E,” it says.
Post double-digit growth despite higher credit cost
On a standalone basis, Bajaj Finance reported 80% growth in its net profit to ₹5,614 crore as compared to ₹3,105.75 crore in the corresponding period last year. The revenue from operations grew 27% to ₹14,487.43 crore, from ₹11,410.28 crore in the year-ago period.
On a consolidated basis, the NBFC's net profit was up 13% year-on-year (YoY) at ₹4,014 crore in Q2 FY25, while the total income increased by 27.7% YoY to ₹17,095 crore. The consolidated numbers include the NBFC's subsidiaries, Bajaj Housing Finance and Bajaj Financial Securities.
On a standalone basis, the net interest income (NII), the difference between interest earned and paid, was up 23% at ₹8,054 crore in Q2FY25 versus ₹6,532 crore in Q2FY24. The consolidated NII also rose by 23% to ₹8,838 crore from ₹7,196 crore in the same period last year.
Non-interest income stood at ₹2,110 crore, up 3% QoQ. The fee income was lower QoQ due to the transfer of the collections activity to RBL Bank (in its co-branded credit cards).
On the asset quality front, gross non-performing assets (NPAs) increased to 1.06% of the gross loans from 0.91% in Q2 FY24. In a similar trend, net NPAs rose to 0.46% in Q2 FY25 from 0.31% in the year ago fiscal. The deterioration in asset quality was largely due to a rise in net credit costs, which rose to 2.1% from 1.5% in the previous year.
As of September 30, 2024, the consolidated assets under management (AUM) stood at ₹3.73 lakh crore, up 29% from ₹2.9 lakh crore during the same period last year. The number of new loans booked increased by 14% in Q2 FY25 to 9.69 million compared to 8.53 million in Q2FY24.
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