Bajaj Finance nears record high; stock surges 44% in one month

Analysts' outlook on Bajaj Finance's long-term prospects remains positive.

Shares of Bajaj Finance moved higher by 4 per cent to Rs 4,678 on the BSE in intra-day trade on Wednesday, thereby surging 44 per cent in the past one month. The stock of the non-banking finance company (NBFC) was trading at its highest level since March 2020. It was 5 per cent away from its record high level of Rs 4,923, touched on February 20, 2020, in intra-day trade.

For the July-September quarter (Q2FY21) quarter, Bajaj Finance had reported in-line performance with elevated Covid provisions, lower opex, which enabled higher-than-expected operating profit and standstill status kept the asset quality stable. However, analysts’ outlook on the company’s long-term prospects remains positive.

“Leaving FY21 behind and front-loading provisions for asset quality stress, the management has guided for improvement from FY22E. Given lower moratorium and meagre restructuring till date, return ratios are well placed to witness improvement ahead”, ICICI Securities said in result update while maintaining a positive outlook on the stock.

“On the growth momentum front, management is relatively more optimistic for the October-March period (H2FY21E). However, regaining the lost market share would be a time-consuming task, in our view. We also remain watchful of the performance of Flexi Loans (Rs 430 billion) which also include converted Flexi Loans of about Rs 100 billion as well”, analysts at Emkay Global Financial Services said in result update.

“While Bajaj Finance’s Q2FY21 operating performance was in line with estimates, earnings were lower on account of higher than expected provisions. The management was prudent in its approach to growth and provisioning. Even as we build higher provisions, our earnings estimates remain largely unchanged as we factor in a slight improvement in cost metrics,” analysts at HDFC Securities said with an ‘add’ rating on the stock.