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What should investors do with Bajaj Finance post Q1 results: buy, sell or hold?

Bajaj Finance Q1: Loan losses and provisions for Q1FY22 were Rs 1,750 crore, higher by 3.8 percent over Rs 1,686 crore provisions recorded in Q1FY21.

July 22, 2021 / 09:51 AM IST
 
 
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Bajaj Finance share price rose over 2 percent in the early trade on July 22 two days after the company reported its June quarter earnings.

On July 20, the company reported a 4.2 percent year-on-year growth in consolidated profit at Rs 1,002 crore for the quarter ended June 2021, with asset quality under pressure and elevated provisions. The consolidated profit in the year-ago quarter was at Rs 962 crore.

The company's consolidated net interest income grew by 8 percent to Rs 4,489 crore compared to the corresponding quarter of the last fiscal, the company said in its BSE filing. The interest income reversal for the quarter was Rs 451 crore as compared to Rs 306 crore in the year-ago period.

Also Read - Bajaj Finance Q1 profit rises 4.2% to Rs 1,002 crore, asset quality weakens

The consolidated results of Bajaj Finance include those results of its wholly owned subsidiaries Bajaj Housing Finance (BHFL) and Bajaj Financial Securities (BFinsec).

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The market was closed for trading on July 21 on account of public holiday for Bakri Id.

Loan losses and provisions for Q1FY22 were Rs 1,750 crore, higher by 3.8 percent over Rs 1,686 crore provisions recorded in Q1FY21.

Here is what brokerages have to say about the stock and the company post June quarter earnings:

Goldman Sachs | Rating: Sell | Target: Rs 4,479

Goldman Sachs maintained sell rating on the stock as the Q1 operating was a miss. While business transformation is in focus but competition is intense, the brokerage said.

The earnings were a miss due to difficult macro conditions and slow growth in franchise products. In the near-term, the company is facing another round of earnings downgrade.

Morgan Stanley | Rating: Overweight | Target: Rs 6,850

According to Morgan Stanley, the company has three Ps- profits, platform and payments, that excite investors in ‘new age’ stocks.

The broking house cut EPS forecast after weaker-than-expected Q1 earnings, while stock looks fairly valued versus its base case.

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Citi | Rating: Buy | Target: Rs 6,950

There was a high stress, while decent early traction of wallet. Citi lower FY22 / 23 earnings by 11%/3% . The tech strategy will be less ‘burn to grow’ & more cross-sell to existing customers.

Motilal Oswal | Rating: Buy | Target: Rs 6,750

Despite the transitory deterioration in asset quality and resultant high credit costs, 1QFY22 was a decent quarter for BAF. Customer acquisitions and new loans booked were healthy even in a pandemic-disrupted quarter. COVID-related disruptions are known unknowns, and the quantum of impact on disbursements / asset quality is difficult to ascertain.

In the context of the strong recovery seen in Jul’21, we expect BAF to be able to deliver pre-COVID levels of quarterly run-rate in AUM growth for the remainder of FY22. Provided there is no new COVID wave, we expect BAF to contain credit costs at ~2.6% in FY22. Margins are likely to see a sharp improvement in FY22 on a) lower cost of funds, b) reduced liquidity, and c) a favorable base due to interest reversals.

ICICI Direct | Rating: Buy | Target: Rs 6,900

We remain positive and factoring in high NIMs with risk adjusted growth we value the stock at 7.8x P/ABV on FY23E and revise the target price to Rs 6900 from Rs 5900 earlier. Premium valuations stay.

Expect 20%, 22% advances growth for FY22E, FY23E and PAT growth of 30%, 45%, respectively and expect asset quality to stabilise post unlock by Q4FY22.

Sharekhan | Rating: Buy | Target: Rs 7,000

The company plans to garner 5 million customers by March 2022. This will aid higher customer engagement and thus increased earnings and thus valuation. The management indicated the company is today better prepared (as compared to last year) to face near-term headwinds of the pandemic resurgence.

Sharekhan believe that with improvement in AUM growth, liquidity drag to reduce, will be positive for margins. Given BFL’s strong balance sheet and business strengths, we believe the company is structurally an over 20% ROE business franchise in a normalised

steady state basis.

We believe that BFL’s stable leadership, well-capitalised balance sheet, robust risk management, and prudent management make it a strong franchise for the long term, which is well placed to ride over medium-term challenges.

At 09:17 hrs Bajaj Finance was quoting at Rs 6,076.90, up Rs 139, or 2.34 percent on the BSE.

The share touched a 52-week high of Rs 6,340 and a 52-week low of Rs 3,008.85 on 06 July, 2021 and 24 September, 2020, respectively.

Currently, it is trading 4.15 percent below its 52-week high and 101.97 percent above its 52-week low.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Moneycontrol News
first published: Jul 22, 2021 09:51 am

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