Bajaj Finance shares slip over 6% despite reporting highest-ever profit in Q4; brokerages see up to 24% upside

Despite reporting the highest-ever profit in the March quarter of FY22, financial heavyweight Bajaj Finance shares tumbled over 6 per cent to Rs 6,791 per share on the BSE on Wednesday. The company’s calculated net interest margin (NIM) had declined to 12.3 per cent in Q4FY22.  

Amid healthy consumer sentiments, Bajaj Finance on Tuesday reported its highest-ever consolidated net profit up by 80 per cent year-on-year to Rs 2,420 crore in the March-end quarter for the financial year 2021-22, as compared to Rs 1,347 crore posted in the year-ago period. 

The Non-Banking Finance Company (NBFC) reported a growth of 30 per cent YoY in net interest income to Rs 6,068 crore in Q4FY22. 

"Loan losses and provisions for Q4FY22 was Rs 702 crore as against Rs 1,231 crore. The company holds management and macro-economic overlay of Rs 1,060 crore as of March 31, 2022," the company’s filing said. 

Stating that the structural framework of Bajaj Finance is in place to deliver high growth and profitability, YES Securities said, “Management is upbeat about AUM growth, active customer base addition on digital app platform and asset quality.” 

The brokerage sees over 25 per cent AUM growth and over 35 per cent earnings growth over FY22-24. The company offers much superior growth and profitability metrics within our financials coverage universe and the stock currently trades at 7x FY24 P/ABV, it said, maintaining a Buy rating with target price of Rs 9000 per share, an upside of over 24 per cent. 

Similarly, another brokerage firm Motilal Oswal 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.  

The company should deliver an RoA/RoE (Return on Assets/ Return on Equity) of 4.2-4.4%/21-22% over the medium term, the brokerage said, maintaining a Buy rating with a target of Rs 8,350 per share (8x FY24E BVPS), implies over 15 per cent upside.