Bajaj Finance shares fall as Q1 earnings miss estimates, here’s what brokerages say

Shares of Bajaj Finance fell over 2% in early deals on Wednesday after the NBFC reported its Q1 earnings. Net profit in the June 2024 quarter climbed 14% rose to Rs 3,912 crore in Q1 against Rs 3,437 crore in the June 2023 quarter. Revenue for the quarter stood at Rs 16,098 crore in Q1 against Rs 12,497 crore in the June 2023 quarter. 

The stock slipped 2.55% to Rs 6560 on Wednesday. Market cap of Bajaj Finance slipped to Rs 4.08 lakh crore. Total 0.40 lakh shares of the firm changed hands amounting to a turnover of Rs 26.23 crore on BSE.

Track Budget 2024 updates real-time with BT’s non-stop live streaming of India’s most-important event from 8 am to 7 pm

Bajaj Finance’s relative strength index (RSI) stands at 35.4 which signals the stock is neither oversold nor overbought. A level below 30 is defined as oversold while a value above 70 is considered overbought. Bajaj Finance stock has a one-year beta of 0.9, indicating low volatility during the period

Motilal Oswal has maintained its neutral stance post Q1 earnings. It assigned a price target of Rs 7,500 , up 11% against the previous close.

“We cut our FY26 PAT estimate by 3% to factor in higher steady-state normalized credit costs. We estimate a CAGR of 27%/24% in AUM/PAT over FY24-FY26 and expect Bajaj Finance to deliver RoA/RoE of 4.2%/22% in FY26. Despite a healthy PAT CAGR of 24% over FY24-FY26E and RoA/RoE of 4.2%/22% in FY26E, we see limited upside catalysts. Consequently, we maintain our Neutral rating on the stock with a price target of Rs 7,500 (premised on 4.2x FY26E BVPS),” said the brokerage.

Global brokerage firm Jefferies retained its ‘Buy’ rating on Bajaj Finance but trimmed its price target to Rs 7,780 from Rs 9,260 earlier. Jefferies said profit missed street expectations. A sharper rise in credit costs, climbing to 2.3% of average AUM (adjusted for the utilisation of reserves) was a major drawback.

Citi also cut its price target on Bajaj Finance to Rs 8,275 but retained its ‘Buy’ rating on the stock.

Bajaj Finance’s core earnings missed expectations as NIMs fell 23 basis points as against 30-40 bps guided for the first half. Additionally, the credit cost was elevated at 2%, compared to 1.75-1.85% guidance, said Citi. 

Meanwhile, total expenses climbed to Rs 10,839.48 crore in the last quarter against Rs 7951 crore in the corresponding quarter of the previous year. 

Assets under management (AUMs) climbed 31% to Rs 3.54 lakh crore in Q1 compared to Rs 2.70 lakh crore in Q1 of FY24. 

New loans booked climbed 10% to 1.09 crore against 0.94 crore in the June 2023 quarter. 

The company resumed sanction and disbursal of loans under ‘eCOM’ and ‘lnsta EMI Card’ and issuance of EMI cards after the RBI removed the restrictions on these businesses on 2 May 2024.

Customer franchise stood at 88.11 million as of 30 June 2024 as cornpared to 72.98 million as of 30 June 2023, a growth of 21 %. The company’s customer franchise grew 4.47 million in Q1 FY25.

Net interest income increased by 25% in Q1 FY25 to Rs 8,365 crore from Rs 6,717 crore in Q1 FY24. 

Gross NPAs and Net NPAs as of June 30, 2024 stood at 0.86% and 0.38% respectively as against 0:87% and 0.31 % as of June 30, 2023. The company has provisioning coverage ratio of 56% on stage 3 assets.