Bajaj Finance is expected to continue to post robust growth in its Q2 earnings, to be announced on October 23.
The stock lost 5.6 percent during the quarter due to liquidity crunch in NBFCs but the correction was far less compared to other finance companies due to strong fundamentals of the company, experts said. It gained more than 20 percent year-to-date.
Asset Under Management
Brokerage houses expect strong loan growth to be around 35 percent YoY during the quarter as consumer segment continued to be the prime growth driver .
"Strong loan growth will continue at around 34-36 percent YoY primarily driven by consumer and rural book," Axis Capital said.
ICICI Securities said for Bajaj Finance Q2 is seasonally a weak quarter compared to Q1 and Q3, but led by the consumer finance segment, it estimates AUM will increase 35 percent YoY to Rs 97,520 crore.
Motilal Oswal also expects AUM growth of 37 percent YoY in Q2FY19, driven by consumer durables financing, in which the company continues to increase its market share.
Net Interest Income and Margin
Given strong loan growth, net interest income is also expected to be robust with 35-40 percent increase YoY, brokerage houses said.
"Calculated margins of around 9.6 percent are expected with NII growth of 40 percent YoY Rs 2,442 crore," ICICI Securities said in a note.
Kotak Securities also said loan growth will remain strong at 39 percent YoY and 7 percent QoQ driving 7 percent QoQ and 41.5 percent YoY growth in NII.
Motilal Oswal said calculated margin is expected to remain unchanged YoY at 11.1 percent while Emkay Research said net interest margin is expected to improve marginally on a YoY basis to 11.3 percent on the back of 1) higher yields and 2) on the accrual of benefits emanating from the recent equity capital raising. Asset quality is likely to remain stable.
Brokerage houses expect profit growth for the quarter in the range of 40-60 percent YoY.
Axis Capital expects profit to grow 41 percent and Kotak 41.5 percent while Emkay Research sees 55 percent and Ambit Capital expects a whopping 60 percent growth in bottomline on strong operational numbers and lower credit cost.
Under Ind-AS, upfront booking of gain on securitisation would increase reported earnings, Motilal Oswal said.
Overall research houses expect asset quality of the company to be stable to healthy.
ICICI Securities said asset quality may stay healthy while provisions are seen steady QoQ while Axis Capital expects asset quality to remain largely stable.
"Asset quality is likely to remain stable. We expect provisions of Rs 340 crore in Q2FY19, as against Rs 330 crore in Q1FY19 and Rs 250 crore in Q2FY18," Motilal Oswal said.
Key issues to watch for would be Ind-AS impact on earnings; incremental cost of funds; asset quality trends, especially in LAP and 2W/3W businesses; and traction in cross-sell franchise.