Bajaj Finance stock rises 3% post 30% jump in Q4 profit

Shares of Bajaj Finance Ltd gained as much as 3% in intraday trade on Thursday following the non-banking financial company's Q4 earnings.

The NBFC stock opened at ₹6,075 per share and rose to ₹6,254 apiece on the National Stock Exchange (NSE). In comparison, the benchmark Nifty 50 was trading flat.

This comes a day after the non-bank lender's net profit surged 30% year-on-year to ₹3,158 crore for the January-March quarter compared with ₹2,420 crore in the corresponding period last year.

Bajaj Finance's net interest income (NII) increased 28% to ₹7,771 crore in the fourth quarter, up from ₹6,061 crore in Q4 FY22.

The number of new loans booked during the quarter under review grew 20% to 7.56 million as against 6.28 million in the year-ago period.

The company's assets under management (AUM) jumped 29% ₹247,379 crore at the end of the March quarter from core AUM of ₹192.087 crore as of March 2022. AUM growth in the fourth quarter was the highest ever at ₹16,537 crore.

Gross non-performing assets and net NPAs at the end of the March quarter stood at 0.94% and 0.34%, respectively, as against 1.60% and 0.68% as of March 31, 2022.

Loan losses and provisions for Q4 FY23 stood at ₹859 crore as against ₹702 crore in Q4 FY22.

Here is what brokerages have to say about Bajaj Finance's fourth-quarter results:

According to Yes Securities, Bajaj Finance's performance doused emerging concerns pertaining to competition in the business-to-business segment, slowdown in the housing portfolio, growth trajectory in new loan bookings, and the impact of inevitable net interest margin (NIM) moderation on return on assets.

Factors that drove earnings in Q4 FY23 were resilient NIM (supported by lending rate hikes taken so far) and restrained operational expenditure growth, the brokerage says in a note.

"We have marginally upped our AUM growth forecast and pruned credit cost estimates which has led to FY24/25 earnings being upgraded by 4-5%. Addition of new product lines like Gold Loans, Auto loans, CV finance, Tractor loans, Microfinance and Emerging Corporate loans would support long-term growth and profitability of the franchise," says Yes Securities.

The brokerage reiterates its 'BUY' rating on the stock with an upgraded target price of ₹7,865.

Foreign brokerage Morgan Stanley also retained its 'Overweight' rating on the counter with a price target of ₹8,000 per share. The potential peaking of interest rates will also act as a tailwind for the stock, Morgan Stanley says.

Macquarie, however, says that Bajaj Finance's net interest margins have achieved their peak and investors should brace for some moderation of 40 to 50 basis points. The brokerage maintains its 'Underperform' rating with a target of ₹5,200 per share.