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Bajaj Finance share price tanks 5% despite in-line Q4 results; should you buy, hold or sell? What analysts say

Bajaj Finance share price tanked 5% on Wednesday after the NBFC posted an 80% on-year growth in net profit at Rs 2,420 crore for the fourth quarter ended March 2022. The board of directors also recommended a dividend of Rs 20 per share of face value of Rs 2 each on equity shares for FY22.

Bajaj Finance share price tanks 5% despite in-line Q4 results; should you buy, hold or sell? What analysts say
Bajaj Finance shares hit an intraday low of Rs 6,855, down 5% from previous close on BSE.

Bajaj Finance share price tanked 5% on Wednesday after the NBFC posted an 80% on-year growth in net profit at Rs 2,420 crore for the fourth quarter ended March 2022. The board of directors also recommended a dividend of Rs 20 per share (1,000%) of face value of Rs 2 each on equity shares for FY22. Bajaj Finance shares hit an intraday low of Rs 6,855, down 5% from previous close on BSE. Brokerages remain mixed on the stock and see up to 31% upside and 17% downside going forward. “We expect Bajaj Finance to deliver a healthy AUM CAGR of 25% over the next two years. Even though the management has guided that it will prioritize margin over loan growth, NIM compression is likely in FY23, as levers like normalization in excess liquidity and borrowing costs have largely played out,” said Motilal Oswal in its note.

Stock talk: Should you buy, hold or sell Bajaj Finance shares?

ICICI Direct: Buy
Target price: Rs 9,500

Analysts at ICICI Direct believe that Bajaj Finance is a dominant player in the consumer finance space and since the fin-tech story is embedded in this business, valuations should stay at premium. “The digital web platform, similar to app is the new strategy in FY23. We raise PAT estimates for FY24 by 17.8%,” they said. Digital transformation with robust customer additions and wallets is expected to boost profitability factoring initial cashbacks as part of opex, no impact on profit. According to the brokerage firm, Bajaj Finance’s core business has got potential and is well on track to get transformed into an adaptable new age fin-tech. No plans to convert to a bank on an immediate basis. It maintains ‘buy’ rating on the stock with a target price of Rs 9,500 per share, implying 31% potential rally in 12 months.

Motilal Oswal: Buy
Target price: Rs 8,350

According to analysts at Motilal Oswal Financial Services Ltd, 4QFY22 was a healthy quarter for Bajaj Finance with all-round momentum across key business parameters. Customer acquisitions and trajectory in new loans remained strong. “This momentum will only get stronger with its digital ecosystem: app, web platform, and full-stack payment offerings. We expect BAF to deliver a healthy AUM CAGR of 25% over the next two years. The competitive landscape continues to remain aggressive. We cut our FY23/FY24 PAT estimate by 4% each to factor in potential NIM compression and a higher OPEX ratio of 35% over the next two years,” they said. The brokerage expects Bajaj Finance to deliver a RoA /RoE of 4.2-4.4%/21-22% over the medium term. It maintains a ‘buy’ rating on the stock with a target price of Rs 8,350 per share.

Kotak Securities: Sell
Fair Value: Rs 6,500

Analysts at Kotak Securities believe that strong consumer demand and aggressive expansion will likely drive topline growth for Bajaj Finance. Covid-driven credit costs and interest reversals in base will accelerate on-year earnings. “The Street will likely continue to focus on progress, success of its digital strategy, a tad weaker than expected for now. We are cutting our core estimates by 2-3% reflecting marginally lower loan growth and NIM. We expect Bajaj to deliver 23-25% near-term loan growth. We expect 23-26% core PBT growth over FY23-25, translating to 21% RoE,” it said. The broker maintains ‘sell’ call on the stock with a Fair Value (FV) of Rs 6,500, up from Rs 6,350 earlier.

CLSA: Sell
Target price: Rs 6,000

Bajaj Finance missed CLSA’s Q4 PAT estimates by 9% on account of a 6% NII miss. The brokerage firm has been highlighting the growing disconnection between the valuations of top quality banks and Bajaj Finance over the past year, more so in the context of shrinking growth outperformance. “We cut our FY23/24 PAT estimated by 8%/9% and our target price by 8% from Rs 6,500 to Rs 6,000. We maintain out Sell rating given a rich valuation.” It recommended investors to switch to private sector banks in the large-cap lending space.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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First published on: 27-04-2022 at 10:51:03 am