Bajaj Finance Q2 earnings almost meet Street expectations; what should investors do?

Bajaj Finance shares took centre stage on Wednesday after the non-banking financial company reported a mixed set of results for the July-September period. The stock declined by as much as Rs 241.2, or three per cent, to Rs 7,850.2 apiece during the session on BSE amid an overall lacklustre start to the day for the market.  

The NBFC stock settled 2.7 per cent weaker for the day at Rs 7,871.1 apiece on the bourse. 

Bajaj Finance Q2 results: A summary

After market hours on Tuesday, the company reported a 27.7 per cent year-on-year jump in consolidated net profit to Rs 3,550.8 crore for the second quarter of the current financial year while its net interest income (NII) grew 26.3 per cent to Rs 8,845 crore. NII is the difference between the interest earned and the interest paid.

The company said it was a good quarter across all financial and portfolio metrics.    

According to Zee Business research, Bajaj Finance's quarterly net profit was estimated at Rs 3,604 crore and NII at Rs 7,227 crore.

Its net interest margin (NIM), however, decreased by 14 basis points (bps) on a sequential basis to 10.26 per cent. NIM is a key measure of profitability for financial institutions. 

The company's asset quality worsened, as reflected in its gross non-performing assets (GNPAs), or gross bad loans, as a percentage of total loans, which increased to 0.91 per cent from 0.87 per cent three months ago, according to a regulatory filing. 

Net non-performing assets (NNPAs), however, remained unchanged sequentially at 0.31 per cent for the quarter under review.

EDITOR'S TAKE | Bajaj Finance (BAJFINANCE) futures have support at Rs 7,930-8,000 levels  

Zee Business Managing Editor Anil Singhvi pointed out that the NBFC's quarterly performance was in line with expectations with strong growth momentum though he termed the drop in the NIM to be "a big negative".

The market wizard sees support for Bajaj Finance futures coming in at Rs 7,930-8,000 levels and a higher zone at Rs 8,145-8,175 levels. 

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Should you buy, sell or hold Bajaj Finance (BAJFINANCE) shares after the Q2 results announcement?

According to Jefferies, which maintained a 'buy' rating on Bajaj Finance after the earnings announcement, the NBFC's AUM growth was strong and broad-based and though its NIM may be compressed by 25-30 basis points over the next 2-3 years, it should be made up by stronger growth and operating leverage. 

The brokerage raised its price target for the stock by Rs 640, or 7.2 per cent, to Rs 9,470, suggesting an upside of 17 per cent from the previous close.  

HSBC retained its 'buy' rating and raised its target for the stock by Rs 120 to Rs 9,620. The brokerage raised its earnings per share (EPS) estimates for Bajaj Finance by 0.1-2.5 per cent for the financial years 2023-24 through 2025-26 to reflect a higher AUM growth outlook.

The Bajaj Finance stock finished Q2 with a gain of 9.1 per cent, sharply outperforming a 2.4 per cent rise in the headline Nifty50 gauge. 

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