Bajaj Finance hits all-time high on strong Q4 results; stock surges 5%

In the past three trading days, the stock has rallied 13 per cent, as compared to 1 per cent gain in the benchmark S&P BSE Sensex.

Bajaj Finance shares hit a fresh all-time high of Rs 3,262, up 5 per cent, in early morning trade on the BSE on Friday after the company reported a better-than-expected profit and net interest income (NII) in March quarter.

The firm recorded a strong 57 per cent year-on-year (Y-o-Y) growth in net profit at Rs 1,176 crore in March quarter. while NII grew 50 per cent at Rs 3,394 crore on YoY basis. Analysts, on an average, had expected profit of Rs 1,062 crore and NII of Rs 3,271 crore for the quarter. 

Bajaj Finance's assets under management (AUM) rose 41 per cent at Rs 1.16 trillion, against analyst expectations of 40 per cent over the previous year quarter.

The stock surpassed its previous high of Rs 3,162, recorded on May 3, 2019. It has rallied 13 per cent in the past three trading days, as compared to 1 per cent gain in the benchmark S&P BSE Sensex. Bajaj Finance was the top gainer among benchmark indices, the S&P BSE Sensex and Nifty 50 index at 10:23 am.

Bajaj Finance’s business momentum continued to be strong across its high yielding segments (consumer & rural) with record customer acquisition and cross sell; mortgage lending also picked up speed. Margins continue to delight even in the rising interest rate environment by expanding 110 basis points (bps) Y-o-Y and are at highest levels in all these years. Operating leverage has played a key role in achieving high profitability. Asset quality continues to remain stable while maintaining PCR at 60 per cent, analysts at Antique Stock Broking said in result update. The brokerage firm maintains ‘hold’ rating on the stock with target price of Rs 3,300 per share.

The company has created one-of-its-kind customer franchise and journey keeps on getting better with newer products, newer geographies and newer delivery mechanisms. Using its size to its advantage, both on borrowing cost and cross sell front, operating leverage benefits can continue for longer than we expect, it said.

Bajaj Finance is well covered on asset liability management (ALM) to manage impact of liquidity hardening, even though it has gained market share in auto segment on the back sparse competition, while consumption demand has slowed down. Net interest margin (NIM) is expected to remain under slightly pressure as consumer durable growth remains weak, analyst at Narnolia Financial Advisors said in result update.

The brokerage firm expects liability mix to get diversified as management forays into ECB route thus strengthening liability mix further. Strong growth of cross selling franchise can decline origination cost and also improve credit cost going ahead, the analysts said, while adding ‘neutral’ rating on the stock with a target price of Rs 2,956.