This finance company’s shares have given 50% CAGR in 10 years. Do you own?

Bajaj Finance Ltd is a large cap non-banking financial company (NBFC) with a market capitalization of ₹343,127 Crore. On the NSE, Bajaj Finance shares reached a 52-week high of ₹8,050.00 on 18th October 2021 and a 52-week low of ₹5,488.00 on 16th May 2022, showing that the stock is now trading 29 per cent below its 52-week high and 3.09 per cent above its 52-week low. Bajaj Finance is now trading below its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, yet despite this, the stock has delivered a 52.43 per cent CAGR over the previous ten years and a 32.71 per cent CAGR over the last five years, according to the data of Value Research.

With a market capitalization of ₹3,43,127 crore, it is the sector's second-largest company, and with a growth in net profit of 79.67 per cent, the company announced good results for the quarter ended Mar 22 as it revealed a consolidated net profit for the quarter ended March at ₹2,419.51 crore, up 79.67 per cent from ₹1,346.64 crore in the same quarter last year. The company has revealed good outcomes for the last three quarters, and for the quarter ended March 2022, Bajaj Finance reported the highest net sales of ₹8,626.57 Cr, the highest PBDIT (Profit before depreciation, interest, and taxes) of ₹5,928.80 Cr, and the highest operating profit to net sales outcome of 68.73 per cent. The company's net interest income (NII) for the March quarter jumped by 30% YoY to ₹6,068 crore, and the company also recorded the highest ever consolidated profit after tax of ₹7,028 crore for the fiscal year ending March 2022. The company's net interest income (NII) for the March quarter jumped by 30% YoY to ₹6,068 crore, and the company also recorded the highest ever consolidated profit after tax of ₹7,028 crore for the fiscal year ending March 2022. On a standalone basis, NII for Q4 FY22 jumped by 32% YoY to ₹5,672 crore, while profit after tax (PAT) climbed by 95% YoY to ₹2,268 crore.

In addition, the company declared a dividend of ₹20 per share. The dividend payment record date is July 1, 2022, and this amounts to a dividend yield of 0.35 per cent at the current share price of ₹5,658. According to the brokerage firm Axis Securities, the company will continue to invest heavily in teams and technology for business transformation. Given the investments for the Omnichannel strategy towards geo-expansion, app platform, web platform etc Opex is expected to remain elevated and the C-I Ratio is likely to range between 34.5-35.5% in FY23.

“The management indicated that the company does not intend to convert into a bank over the next 3 years. BAF will continue to remain focused on building a payment and financial services business and aspire to build a customer franchise of ~100 Mn customers over the next 4-5 years,” the brokerage has said.

Axis Securities has given a buy rating on the shares of Bajaj Finance with a target price of ₹8200 based on the outlook of digital initiatives and business transformation which are key positives for AUM growth. Furthermore, due to increased Opex and marginally higher credit costs, the brokerage has reduced EPS expectations by 3/4 per cent for FY23-24E.