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Business News/ Markets / Stock Markets/  Bajaj Finance share price drops over 2% post Q2 results; what should you do? Here's what top brokerages say
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Bajaj Finance share price drops over 2% post Q2 results; what should you do? Here's what top brokerages say

Bajaj Finance share price fell over 2 per cent after Q2FY24 results. Bajaj Finance reported a 27.7 per cent YoY growth in net profit for Q2FY24.

Bajaj Finance share price hit its 52-week high of ₹8,190 on October 6 this year and its 52-week low of ₹5,487.25 on March 20 this year, on the BSE. (Pixabay)Premium
Bajaj Finance share price hit its 52-week high of 8,190 on October 6 this year and its 52-week low of 5,487.25 on March 20 this year, on the BSE. (Pixabay)

Bajaj Finance share price: Bajaj Finance share price fell over 2 per cent in early trade on BSE on Wednesday, October 18, a day after the company reported its current fiscal's July-September quarter (Q2FY24) scorecard. Bajaj Finance share price opened at 8,080.95 against the previous close of 8,091.35 and dropped 2.05 per cent to the level of 7,925 quickly. Around 9:25 am, the stock was 1.36 per cent down at 7,981.35 on BSE.

Bajaj Finance share price has underperformed the equity benchmark Sensex in the last one-year timeframe. The stock has gained just about 10 per cent while the Sensex has risen about 14 per cent in the last one year.

Bajaj Finance share price hit its 52-week high of 8,190 on October 6 this year and its 52-week low of 5,487.25 on March 20 this year, on the BSE.

From its 52-week low, Bajaj Finance share price is now up 47 per cent as of October 17 close.

Bajaj Finance Q2 Results

After market hours on Tuesday, October 17, Bajaj Finance reported a 27.7 per cent year-on-year (YoY) growth in its Q2FY24 consolidated net profit at 3,550.80 crore against 2,780.65 crore in the corresponding quarter of last year.

Net interest income (NII) of the non-banking finance company (NBFC), on a consolidated basis, in Q2FY24 increased by 26 per cent to 8,845 crore from 7,002 crore, year-on-year (YoY), according to company's exchange filing.

The company's assets under management (AUM) grew 33 per cent YoY to 2.9 lakh crore and interest income showed a growth of 38 per cent to 11,734 crore. The company added 35.8 lakh new customers in Q2FY24, taking the total customer base to 7.7 crore as of September 30.

Read More: Bajaj Finance Q2 Results: Net profit rises 28% on year to 3,550.80 crore, NII up 26%

Meanwhile, Bajaj Finance has preemptively reduced business by 8-14 per cent in urban and rural areas to customers who already have a number of small ticket loans, managing director Rajeev Jain told analysts on Tuesday.

Read More: Bajaj Finance trims exposure to ‘imprudent borrowers’ in rural, urban areas

Also, Bajaj Finance on Tuesday announced that it had acquired up to 26 per cent equity stake in Pennant Technologies Private Limited for about 267.50 crore.

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Brokerages maintain earlier views on Bajaj Finance post-Q2

Most brokerage firms have maintained their earlier views on Bajaj Finance stock after the NBFC's September quarter earnings. However, some of them have revised their estimates for the NBFC firm.

Motilal Oswal Financial Services has reiterated its buy call on the stock with a target price of 9,600, implying a 19 per cent upside.

Motilal Oswal pointed out that Bajaj Finance's customer acquisitions and the new loan trajectory have been strong and the momentum will only get stronger with the digital ecosystem, such as apps, web platforms and full-stack payment offerings, in place.

The brokerage firm has incorporated the announced equity capital raise of about 10,000 crore in its estimates and expects an AUM and PAT CAGR of about 29 per cent and 28 per cent, respectively, over FY23-FY26.

"Bajaj Finance should be able to offset the NIM compression in FY24 with lower operating cost ratios. Our EPS estimates are largely unchanged, and we now introduce our FY26 estimates. We expect Bajaj Finance to deliver a PAT CAGR of 28 per cent over FY23-FY26 and an RoA (return on assets) and RoE (return on equity) of 4.8 per cent and 23 per cent, respectively, in FY26," Motilal Oswal said.

"Key monitorable for FY24 are (a) the evolution of its payments landscape and adoption of its payment offerings, and (b) the degree to which the NIM compression can be offset with operating leverage, resulting in a contraction in cost ratios," Motilal Oswal said.

Another brokerage firm Nirmal Bang has upgraded the stock to a 'buy' and raised the target price to 9,520, implying an 18 per cent upside potential.

Nirmal Bang expects a strong AUM growth of 31 per cent and 29 per cent in FY24 and FY25, respectively, driven by equal growth across segments. The brokerage firm believes that Bajaj Finance's NIM may moderate in FY24 to 10.2 per cent as the cost of funds (CoF) peaks. However, the brokerage firm believes this will be offset by the benefits of scale as operating leverage kicks in, maintaining RoA at nearly 5 per cent.

"We have made marginal changes in FY24 estimates and have raised FY25E PAT estimates by 5 per cent, driven by strong growth in NIM and operating leverage. We have rolled forward our valuation to September 2025E ABV (adjusted book value) of 1,781 and assigned a multiple of 5.3 times, based on which we have derived a target price of 9,520, reflecting an upside of 18 per cent," Nirmal Bang said.

"A significant cross-sell franchise, foray into new segments/business transformation initiatives and proven execution track record provide confidence about future prospects," said the brokerage firm.

Global brokerages, too, have maintained their views on Bajaj Finance stocks. Among the global brokerage firms, CLSA maintained a buy call on Bajaj Finance with a target price of 9,500 while Jefferies also maintained a buy rating on the stock and raised the target price to 9,470 from 8,830 earlier, reported ET Now.

On the other hand, Macquarie maintained an underperform rating on Bajaj Finance with a target price of 8,033 due to expensive valuations, ET Now reported. Goldman Sachs maintained a 'sell' call on Bajaj Finance with a target price of 7,205, reported CNBC-TV18.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 18 Oct 2023, 09:37 AM IST
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