HDFC Securities notes that Bajaj Finance
reported muted performance (operating profit was nearly 11 per cent below expectations) primarily on account of higher employee expenses. Loan loss provisions remained elevated at 3.4 per cent of AUM as the company took accelerated write-offs of Covid-related stress of Rs 1,530 crore.
However, the brokrage remains positive on the company as it believes BAF is poised to deliver strong AUM growth going forward. "With improving credit quality across segments (except 2/3 wheelers and B2C loans), the management is upbeat about portfolio growth driving operating leverage and profitability. We maintain 'BUY' with revised target price of Rs 4,928," it said in a result review report.
Those at JM Financial are betting on Bajaj Finance's superior business model and strong profitability focus to navigate the near-term challenges. They maintain BUY and value the stock at 33x FY23E EPS implying a target price of Rs 5,750.
In Q4 FY21, new loans booked during fell to 54.7 lakh (5.47 million) as against 60.3 lakh (6.03 million) in the same quarter a year ago, Bajaj Finance
said in a regulatory filing. Net interest income during the quarter also dipped 1 per cent to Rs 4,659 crore from Rs 4,684 crore in Q4 FY20.
Further, the gross and net non-performing assets (NPAs) stood at 1.79 per cent and 0.75 per cent respectively by end of March 2021, as against 1.61 per cent and 0.65 per cent earlier.
Against this backdrop, analysts at Kotak Institutional Equities believe that as the company resumes its growth push, its large base may constrain its ability to deliver on the high multi-year growth implied in its valuations.
"Bajaj’s superior execution capabilities have been impressive and over the past few years, the business has seen several transformations up until the current avatar of multiple verticals and products. At the current juncture, the key challenge for the company is to manage high growth despite such a large base," it said.
Given this, the brokerage has cut their estimates by 3-10 per cent to reflect a realignment of growth to 18-24 per cent from high levels of 19-27 per cent assumed earlier. Besides, a second Covid wave, potential stress from restructured loans (1.2 per cent of loan book) and loans converted to ‘flexi’ in 1HFY21 (7 per cent of loan book) have moderated their stance. The brokerage has 'sell' call on the stock with a target price of Rs 4,200.
Axis Securities too maintains a 'sell' call on the stock and have revised their credit costs downwards for FY22/FY23E given the up-fronting of credit costs.
"While the business transformation process augurs well, the management’s guidance towards a normalized FY22E looks largely baked in current valuations. We maintain a Sell on the stock with a revised target of Rs 4410," it said.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.