January 19, 2022 03:51 PM
Bajaj Finance on Wednesday opened higher by 2.3% after it reported strong December quarter earnings. The stock touched a high of Rs 7,929 apiece. At 9.20am, the scrip was trading at Rs 7,928 on BSE, up 2.38% from its previous close.
Bajaj Finance reported a solid quarter with profit surging 84.4 percent year-on-year at Rs. 1,933.9 crore for the quarter ended December.
Its net interest income in the quarter jumped 40 percent on-year to Rs. 5,553 crore with assets under management (AUM) rising 21 percent on-year to Rs. 1.3 lakh crore. Loan growth at 9% quarter on quarter reflected pickup in underlying business activity.
The firm reported loan-loss provision which declined 22% to Rs. 995 crore from Rs. 1,245 crore in the year-ago quarter. The biggest drop was witnessed in loan-loss provisions for stage 3 and write-offs in the quarter, which nosedived 78 percent on-year to Rs. 816 crore, the company said.
Bajaj Finance’s gross non-performing loans ratio declined to 1.73 percent as against 2.45 percent in the previous quarter. Similarly, net NPA ratio fell to 0.78 percent in the reported quarter from 1.1 percent in the previous quarter.
“(The quarter) was a strong quarter for BAF with an all-round momentum across key business parameters. Customer acquisitions and new loans booked have reached pre-COVID levels and will soon breach historical highs in subsequent quarters”, said Motial Oswal Securities in a note to its investors. The brokerage firm has maintained buy rating and increased its target price to Rs 9080 a share.
The brokerage firm expects the lender to deliver a healthy AUM CAGR of 25% over the next two years and to contain credit costs 2.9% in FY22E. It also increased FY22 profit estimate by 7% to factor in higher loan growth, NII, and non-interest income.
Total customer franchise rose to 55.4 million, up 4.9% quarter on quarter and 19.6% year on year. Its new loans booked grew 17% sequentially to 7.44 million and reached pre-covid levels. Last year new loans booked were at 6.04 million.
With the adoption of the new app, the management has guided at an annual customer acquisition run-rate of 8-9 million from 7-8 million earlier.
The management raised its FY22 credit cost guidance to Rs48-50 billion from Rs43-44 billion earlier. Analysts say this is a rather conservative stance to build management overlay and could see provision write-backs if there is no impact from the third COVID wave.
According to Motilal Oswal, the payments stack could be exciting as Bajaj Finance plans to leverage PPI, UPI, EMI cards, Credit Cards, and QR-based payments, including its presence at POS terminals and eventually to a payment gateway (under Phase II).
The management also articulated that under Phase II of the app, it will roll out a two-wheeler marketplace, doctor RX, short-term wallet loans, loans against securities (LAS), and loans against FD.
“We expect the overall medium-term trajectory to remain strong even as a combination of competition across segments, rising rates and investments in new initiatives will exert some pressure. Amid normalizing business and asset quality performance, cooling down in the Street’s initial euphoria on the new app will temper stock performance”, said Kotak Institutional Equities in a note to investors. The brokerage firm has retained its sell rating on the stock and kept its target price to Rs 6350 a share.